Cash Flow Statement Flashcards
Cash Flows consist of three parts:
Operating, Financing, and Investing
Added together, you get Net Cash Flow
Operations section
Net Income \+ Depreciation and Amortization \+ Any increases in AP and accruals - Any decreases in AP and accruals - Any increases in AR and inventory \+ Any decreases in AR and inventory =Net cash flow from operations
You add depreciation and amortization because
they are non-cash expenses
Why does Goettle think we should use NOPAT in the Operations section of the Cas Flow statement instead of Net Income?
Net Income includes interest expense, which has nothing to do with operations
Why do you add increases in ______and subtract increases in ______?
AP and accruals
AR and inventory
An increase in AP/accruals decreases cash, so add it back
Increases in AR/Inventory increase use of cash so you deduct it
Investment section
- Gross investment in fixed assets, like PPE
+ Sales of fixed assets
If a company’s main source of business is investing,
- for Purchases
+ for sales
(of financial assets)
Finance section
\+ Issuance of Stock \+ Borrowing money in any form - Dividends - Stock repurchases - Debt repayment
Why do you add when you’re borrowing money?
Borrowing increases your debt
If you used NOPAT instead of Net Income in the Operations section, you should account for after-tax interest expense in which part of which section?
Debt repayment, Finance
Net Cash Flow
Total cash from Operating, Investing, and Finance
Change in cash and cash equivalents from one balance sheet to the next
