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Click to edit Master title style,Click to edit Master text styles,Second level,Third level,Fourth level,Fifth level,*,*,Click to edit Master title style,Click to edit Master text styles,Second level,Third level,Fourth level,Fifth level,*,*,*,CashFlow Analysis,Session6,2022/10/24,1,CashFlow Analysis,Thissession,Howto calculateandanalysis acorporationsCash Flow analysis,Howto evaluatethesolvencyofa company basedon its balance sheetandcash flows,2022/10/24,2,CashFlowAnalysis,In case you missed the last session,.,We covered,.,I&E,Balance Sheets,The linkages betweenI&Eand Balance Sheets,2022/10/24,3,CashFlowAnalysis,Business Challenges,EarnProfits,Convert Profitsto Cash as Fast asPossible,2022/10/24,4,CashFlowAnalysis,CashFlow,FromOperatingActivities,FromInvestingActivities,FromFinancingActivities,2022/10/24,5,CashFlowAnalysis,BalanceSheet,Assets,Cash,+AccountsReceivable,+Inventory,+PrepaidExpenses,+Property,Plant&Equipment,+AccumulatedDepreciation,=TotalAssets,Liabilities&Equity,AccountsPayable,+AccruedOperatingExpenses,+AccruedInterestPayable,+IncomeTaxPayable,+NotesPayable,+Capitalstock,+RetainedEarnings,=TotalLiability&Equity,CashFlowStatement,CashFlowFromOperatingActivities,NetIncome,-AccountsReceivableIncrease,-InventoryIncrease,-PrepaidExpensesIncrease,+DepreciationExpense,-AccountsPayableIncrease,-AccruedExpensesIncrease,-,IncomeTaxPayable,=CashFlowformOperatingActivities,+CashFlowFromInvestingActivities,PurchasesofProperty,Plant&Equipment,+CashFlowsFromFinancingActivities,Short-TermDebtBorrowing,+Long-TermDebtBorrowing,+CapitalStockIssue,+DividendsPaidtoStockholders,=,IncreaseinCashforYear,BalanceSheet/CashFlowInteractions,2022/10/24,6,CashFlowAnalysis,Cash FlowFromOperations,Balance,Sheet,last,year,Balance,Sheet,this,year,Income&Expense,this year,Changes in theBalance sheet“closets plus,thedepreciation adjusted income,2022/10/24,7,Cash FlowAnalysis,Cash FlowfromOperations,Profit,(“thebottom line”of theI&EStatement),Plus7,year-to-year,change adjustments,(Balance Sheet),Accounts receivable,Inventory,Prepaid expenses,Depreciation,Accounts Payable,Accrued Expenses,Income TaxPayable,Cashflow,likethe,Balance Sheet uses,CASHACCOUNTING,Not ACCRUAL,ACCOUNTING,2022/10/24,8,CashFlowAnalysis,OperatingCashFlowComments,Net Incomeis from the bottomlineof I&E Statement,(Depreciation Adjusted),Increasesin Operating Assetsdecrease cash flow from profit(,AR,Inventory,PrepaidExpenses,),Increasesin liabilities,“,“help,”,”cash flow(,AP,Accrued Expenses,IncomeTax Payable,),2022/10/24,9,CashFlowAnalysis,Growth ConsumesCa$h!,Increasingrevenue with controlledexpenses will resultin increased profits,Revenue increases also drive increases in operating assets,Cashincreasesare not aslarge asprofit increases butaredelayed becauseof AR,Decliningbusinessesexperience oppositeeffect and canexperience increased“cash flow”over profitchanges,2022/10/24,10,CashFlow Analysis,Depreciation&OperatingCash Flow,Depreciation:Sincethecompanypaidcash for the fixedassets whenit bought them,thecompanydoesnotconsumecash asecond timewhenitusesthem,ThedepreciationoftheI&EStatement istherefore“added back”forcashflow purposes,2022/10/24,11,CashFlow Analysis,BalanceSheet,Assets,Cash,+Accounts Receivable,+Inventory,+PrepaidExpenses,+Property,Plant&Equipment,+AccumulatedDepreciation,=TotalAssets,Liabilities&Equity,AccountsPayable,+Accrued OperatingExpenses,+Accrued Interest Payable,+IncomeTaxPayable,+NotesPayable,+Capital stock,+Retained Earnings,=TotalLiability&Equity,CashFlow Statement,CashFlow From OperatingActivities,NetIncome,-AccountsReceivable Increase,-InventoryIncrease,-Prepaid ExpensesDecrease,+Depreciation Expense,-AccountsPayableIncrease,-Accrued ExpensesIncrease,=Cash FlowformOperating Activities,CashFlow From InvestingActivities,-Purchasesof Property,Plant&Equipment,CashFlows FromFinancing Activities,+Short-TermDebt Borrowing,+Long-TermDebtBorrowing,+Capital StockIssue,-DividendsPaidtoStockholders,=,IncreaseinCashforYear,BalanceSheet/CashFlow Interactions,2022/10/24,12,CashFlowAnalysis,Purchasesof Property,Plant&Equipment,FixedAssets tomodernizeor expandcapacity,Willbe capitalized(depreciated),2022/10/24,13,CashFlowAnalysis,The Depreciation Story,Capital assetsare acashflowoutwhenthe assetis bought(,CashFlow/Investing,),The boughtassets are added totheProperty,Plant&Equipment line ofthe,Balance Sheet,The appropriatedepreciation is allocated forin the periodthatit is,“,“used”onthe,I&E,The sum oftheaccumulated depreciationsfromthe,I&E,is subtracted from the purchase price oftheassets onthe balance sheet,The allocated I&E depreciationis“addedback,”,”tothe Incomein the,CashFlow,analysis,2022/10/24,14,CashFlowAnalysis,BalanceSheet,Assets,Cash,+AccountsReceivable,+Inventory,+PrepaidExpenses,+Property,Plant&Equipment,+AccumulatedDepreciation,=TotalAssets,Liabilities&Equity,AccountsPayable,+AccruedOperatingExpenses,+AccruedInterestPayable,+IncomeTaxPayable,+NotesPayable,+Capitalstock,+RetainedEarnings,=TotalLiability&Equity,CashFlowStatement,CashFlowFro
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