Cashflow

Question 1

10 steps to analyse a cash flow statement

Answer 1

Start with Net Income

Consider Non Cash Adjustment

Working Capital Movement

Cash flow from Operating (CFO

Cash flow from Investing Activities

Cash flow from Financing Activities

Net Cash Flow

Free Cash flow - (CFO - Capex)

Cash flow trends

Debt and Taxes

Question 2

Evaluating Net Income

Answer 2

• Check P&L as start of Indirect cash flow
• Evaluate sustainability and reliability of earning
• Consider revenue and expense driving

Question 3

Working Capital Changes

Answer 3

• assess changes in working capital
• consider RAILS
• significant changes highlight operation efficiency or opposite

Question 4

Cash Flow from Operating Activities (CFO)

Answer 4

• Evaluate cash generated from core business
• Consistently positive indicates strong ability to generate cash and grow operations
• Compare CFO with Net Income and understand reasons for any significant differences.

Question 5

Cash Flow from investment activities

Answer 5

• High Capex = growth Ambitions or high maintenance costs for assets

Question 6

Financing Activities

Answer 6

• examine cash from debt issuance and repayment
• include dividends
• regular dividends indicate positive cash generating company

Question 7

Net Cash Flow and Free Cash Flow

Answer 7

Ultimately, it determines whether the cash position has improved or not

FCF indicates the ability to generate cash after funding operations and capex

Question 8

Trends and Evalution

Answer 8

Over a period of time is the company hemorrhaging cash or generating

Can the company cover debt and tax obligations over a period of time from CFO