ofCashFlows(財務(wù)報表分析,加州大學MBA)

1、On Project Report/Readings1.Market value, use number of shares outstanding, do not use average number of shares outstanding2.Identify source of data or quotes3.Common size analysis, show amounts and percentages 4.Only analyze notes that are related to our current lecture5.Take turn to write the repo

2、rt, do not leave to one person6.In final exams, I may provide you with raw materials and a sample article from our readings for you to analyze the raw materials and write a similar article. So get familiar with all articles. Again, understand but do not memorize.Firm NamesEagle Eye: Valuation Analys

3、is StrategyInvestoriumStatement of Cash FlowCash flow from Operating activities: （營運活動）cash receipts from customerscash disbursed to:suppliers of merchandise employees for salariesCash flow from investing activities: （投資活動）purchase of buildings, equipments, plantsproceeds (進帳）from sales of long term

4、 assetsCash flow from financing activities: （融資活動）borrowing/repay long term debtsissuing new sharesOverview of the Statement of Cash FlowsIn AOL 2000 balance sheet, cash and cash equivalent increased from $936 millions to $2,490 millions. How?The statement of cash flows (a) explains the reasons for

5、a change in cash.(b) classifies the reasons for the change as an operating, investing or financing activity.(c) reconciles net income with cash flow from operations.Montgomery Ward b.f. bankruptThe difference between earnings and cash flows1.I/S Explain change in retained earnings2.I/S is accrued-ba

6、sed3.I/S recognize property rights4.I/S require estimates5.I/S is an opinion 6.I/S is prone to (易于）manipulation7.Firms can survive a long string（長串） of negative earnings1.SCF explain change in cash and cash equivalent2.N/A3.SCF emphasize “actual possessment”4.SCF does not5.SCF is a fact6.SCF is so t

7、o a much less degree7.Firms go bankrupt with a long string of negative cash flows (outflow)Cash flow equation A = L + EA =L+Ecash +non-cash A = L+ Ecash + current A (other than cash) +non-current A= current L+ non-current L+ Ecash = current L+ non-current L+ E - current A (other than cash) -non-curr

8、ent ACash flow from operationCash flows related to selling goods and services; that is, the principle business(主營業(yè)務(wù)) of the firmThe main source of payoffs to shareholders and creditorsThe reason for the firms to existIf firms do not in the long run generate more cash from operation than the returns

9、of funds to shareholders and creditors, the firms go bankruptCash flow from operation-componentsCash collected from customersCash collected as interest (利息）on loans to othersCash collected as dividends （股利）on investment on other firms stocksCash paid to suppliersCash paid to employeesCash paid to ot

10、her service providers: landlords, marketing agency, auditors, consultants, Cash paid to governmentCash paid to creditors as interest on borrowed moneyCash flow from investing activitiesCash flows related to the acquisition or sale of non-current assets: investment, land, property, plants, equipments

11、To maintain the current productivity of the operation, a firm must replace assets that they wear out (消耗）To grow its operation, a firm must acquire additional assetsOld assets may be sold as they become obsolete (過時）, or as the firm change productionInvesting activities thus provide resource to gene

12、rate cash flow from operationsCash flow from investing activities-componentsCash received from sales of land, investment, property, plants and equipmentCash paid to acquire land, investment, property, plants and equipmentCash flow from financing activitiesCash flows related to long-term liabilities

13、and owners equityThe source of cash to be used in investing and operating activitiesTwo sources: shareholders and creditorsThis part of SCF also indicates how much cash the firm returns to its capital providers, i.e., cash distribution to shareholders and creditorsNote: short-term liabilities genera

14、ted in operation, such as account payable, is not related to this categoryCash flow from financing activities-componentsCash received from issuing corporate debts or taking up loansCash received from issuing common shares or preferred sharesCash paid to repay debts or loansCash paid to repurchase sh

15、aresCash paid to shareholders as dividendsRelations among the cash flows from the three categories of activities1CF from Fin. Act.CF fromInv.ActCFFromOp. Act.Free Cash Flow= Cash flow from operating activities + Cash flow from investing activitiesIf positive, normal operation generates more cash tha

16、t it consumes, such as the case of a stable firmIf negative, normal operation generates insufficient amount of cash to be self-sustaining, such as a growing firmTwo methods to prepare the operating portion of SCFDirect method of presentation calculates cash flow from operations by subtracting cash d

17、isbursements to supplies, employees, and others from cash receipts from customers.The indirect method calculates cash flow from operations by adjusting net income for noncash revenues and expenses.Most firms present their cash flows using the indirect method.SCF-Direct methodThe direct method is sim

18、ple and straight:Cash collected from customersCash collected as interest (利息）on loans to othersCash collected as dividends （股利）on investment on other firms stocksCash paid to suppliersCash paid to employeesCash paid to other service providers: landlords, marketing agency, auditors, consultants, Cash

19、 paid to governmentCash paid to creditors as interest on borrowed moneyIndirect method SCF reconciles net income with cash flow from operationcash = current L+ non-current L+ E - current A (other than cash) -non-current Acash = current L - current A (other than cash) + non-current L+ E non-current A

20、Op.Fin.Inv.Indirect method SCF reconciles net income with cash flow from operationNet Income is accrual-based, when we calculate net income, we do not care whether cash has been received or paidBut current assets and current liabilities accounts are impacted when we calculate net income, e.g., we de

21、bit account receivable and credit revenue when finishing a sales activityIndirect method SCF reconciles net income with cash flow from operationSo in the example above, net income is higher than cash flow from operation because this transaction increases net income by increasing revenues, but does n

22、ot increase cash because we debit account receivable and no cash is collected yet.Therefore, to get to the balance of cash from net income, we subtract the increase in account receivable account. This procedure confirms to the cash equation in which increase (positive change) in current assets other

23、 than cash decrease cash flow from operation.Indirect method SCF reconciles net income with cash flow from operationThe indirect method:Net income+ depreciation Increase in current assets accounts+ decrease in current assets accounts decrease in current liabilities accounts+ increase in current liab

24、ilities accounts= Cash flow from operationNotes to financial statements- on cash flowsIs cash the king?Cash is the ultimate payoffs to capital providersEstablished finance theory told us the the value of a firm is the present value of all its future dividendsIs cash the king?Earnings do not always go hand-in-hand with cash flows- Operational reason: a