1 / 19

Statement of Cash Flows

Statement of Cash Flows. CENTRAL FACT. Over long enough periods: NI = Cash from Ops. + Cash from Inv. = Free Cash Flows The difference is timing The goal of SCF is to explain the difference. Why do we care about cash?. Information on: Liquidity “Quality” of earnings

azura
Télécharger la présentation

Statement of Cash Flows

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Statement of Cash Flows

  2. CENTRAL FACT Over long enough periods: NI = Cash from Ops. + Cash from Inv. = Free Cash Flows • The difference is timing • The goal of SCF is to explain the difference

  3. Why do we care about cash? • Information on: • Liquidity • “Quality” of earnings • “Free cash flows” for valuation • Problem: • interpretation is difficult and context specific • depends on the life-cycle of the company • it is hard to know what is a good cash flow

  4. Fundamental Relations Assets = Liabilities + Owners’ Equity Cash = Liabilities + OE - Noncash Assets Cash = Liab. + OE - Noncash Assets Cash = NI + Liab. + CC - Div. - NCA

  5. Formats Two formats for the operation section Financing and investing are always the same

  6. Miscellaneous Cash Flow Stuff • Why don’t lines on SCF tie to changes on B/S? • Foreign currency translation • subsidiaries are generally accounted for in local currency • in consolidation local currency is converted to dollars • changes in accounting balances that result from changes in currency are handled as a separate line item on SCF • changes in shareholders’ equity go to “other equity” on the balance sheet

  7. Example • Foreign sub with the following ‘96 and ‘97 ¥ B/S and the ¥ weakening from ¥100/$ to ¥111/$. ‘96 & ‘97‘96‘97 Cash ¥100 $1.0 $0.9 Inventory ¥200 $2.0 $1.8 Equity (100% owned) ¥300 $3.0 $2.7 • B/S--change in equity ($0.3) is “foreign currency translation adjustment” in shareholders’ equity • SCF--the change in cash ($0.1) is separate line item (not spread across change in inventory, etc)

  8. Acquisition Accounting • You buy a company with identifiable assets with a book value of $100 (fair value of $200) for $250. Identifiable Assets $200 Goodwill $50 Cash $250 Goodwill will appear as an intangible asset On the SCF, the only effect will be $250 as an investing use of cash, even though lots of other accounts change

  9. Major Noncash Transactions • Transactions not involving cash are not reported on the face of the statement • e.g., purchase PP&E for debt, acquire other companies for stock, swap assets • Disclosure is required • typically at the bottom of the SCF

  10. Other Items • Firms must disclose interest and taxes paid • income statement gives “accrual” amounts • cash interest & taxes are used in some analysis • generally disclosed at the bottom of SCF • sometimes disclosed in notes (e.g., Coke)

More Related