when operating cash flow is negative is a good or bad news?
bad news because the firm don’t generate cash flow
direct method for calculate operating c.f.
you list what are the inflows and the outflows specifically
indirect method operating c.f.
you start from the net income and add all non cash expenses and add and subtract expenses/revenuee classified as investing or financing and subtract to change in NWC
indirect method gaap vs ifrs
both permit
direct method gap vs ifrs
both encourage
interest received IFRS and US GAAP
- IFRS: operating or investing
_ GAAP: operating
interest paid IFRS and US GAAP
- IFRS: operating or financing
-GAAP operating
dividends received IFRS and US GAAP
- IFRS: operating or investing
- GAAP: operating
dividends paid IFRS and US GAAP
- IFRS: operating or financing
-GAAP: financing
bank overdrafts IFRS and US GAAP
- iFRS: considered part of cash equivalents
- GAAP: not considered pat of cash equivalent; classified as financing
taxes paid IFRS and US GAAP
- IFRS: generally operating , but a portion can be allocated to investing or financing
- GAAP: operating
non cash transaction
any transaction that does not involve an inflow or outflow of cash, not incorporate in the cash flow statement, must be disclosed
step for the preparation of the cash flow statement
- determine the change in cash
- determine thee net cash flow from operating activities
- determine net cash flows from investing and financing activities
- include summary of net increase in cash, cash at beginning and cash at end
- disclose any significant non cash transaction separately at the bottom of the statement
ending PP&E formula
beginning PP&E + Purchases - Disposition
how you can determine investing cash flow
examine change in long-term assets
how you can determine operating cash flow
examine changes in debt and equity accounts
ending stock formula
beginning stock + issuance - repurchases
free cash flow to the firm
cash flow available to the company’s suppliers of capital
after all operating expenses have been paid
after all operating investments have been made for fixed and working capital
operating activities
deliver or provide goods for sale and provide services: receive cash from customer; pay cash to suppliers; pay cash for operating expenses
investing activates
buy or sell long-term asset and other investment : property, plan and equipment ; other companies’ securities
financing activities
obtain or repay captal: borrow from creditors and repay the principal; issue or repurchasing stock; pay dividend
cash cow business
in a mature firm I expect to have always cash higher than net income
indirect method operating cash flow
net income + add-cash expenses +/- expenses or revenues classified in a different cash flow - change win net working capital where the NWC= INV + A/R - A/P
FCFF FORMULA
net income + int.expense*(1-tax rate) + depreciations - Capex - change in NWC
