Cash flow statement -provide info beyond IS,based on accrual获利, rather than cash and accounting.
包括1.cash receipts现金收入 and cash payments
2.company's operating, investing and financial activities
3.accrual accounting events on cash flows
分析者要考虑：
1.regular operations 有足够cash 去维持business
2.enough cash to pay off debt
3.additional financing
- unexpected obligations
5.取得新机会
23a. compare cash flow from operating,investing and financial activities, classify cash flow to three categories
Cash flow statement come from 2 sources:
1.income statement items
2.changes in balance sheet accounts
A firm's cash receipts and payments分类为
CFO/CFI/ CFF
CFO-operating activities-inflows and outflows of cash from transactions-- affect net income
CFI-investing-acquisition or disposal of long-term assets and certain investments
CFF-financing-affect capital structure
Operating activities
Inflows: cash/ interest/dividend/ sale proceeds from trading securities
Outflows:cash/acquisition/interest paid/tax
Investing activities
Inflows:fixed assets/ sale proceeds from debt and equity investments/loans
Outflows:fixed assets/ debt and equity/ loans
Financial activities
Inflows:principal of debt/ Proceeds from issuing stock
Outflows:principal paid/payments to reacquire stock/ dividends paid to shareholders
23b. Describe how non-cash investing and financing activities
Noncash investing and financing activities 不汇报在cash flow statement--因为不产生cash
--必须disclose在footnote or supplemental schedule
23c. Contrast cash flow under IFRS and GAAP
IFRS allow more flexibility in the classification of cash flows.
Under IFRS,
interest and dividends--operating or investing activities
dividend to company and interest paid to debt --operating or financing activities
income taxes paid--important difference
Under GAAP,
all taxes paid as operating activities
Under IFRS,
taxes-属于operating activities除非expense 与investing or financing transaction有关
23d. Distinguish direct and indirect methods of presenting cash from operating activities and describe arguments in favor of each method
两种方法，都符合GAAP和IFRS--investing and financing activities 一样的
Most firm用间接法
Direct Method--cash inflow from customers减去cash outflows for purchases,operating expense,interest and taxes.
直接法 :是将经营活动中的现金流入和流出各项目直接列出，类似于按现金制列示企业的经营活动的收入和费用;
间接法(Indirect method)则是将企业损益表中的净利润，调整成为经营活动的现金流入和流出。两种方法的投资活动与筹资活动的编制方法相同。
net income 转化成operating cash flow by making adjustments for transactions--不是cash transactions
其中adjustment包括depreciation and amortization, gains and losses,
Arguments for each method
直接法
优点：operating cash receipts and payments
provide more information than indirect method
间接法
only present net result of receipts and payments
focus on the difference between net income and operating cash flow
Disclosure requirments
Under GAAP,
reconciliation is not required under IFRS
Under IFRS,
interest and taxes must disclose separately in cash flow statement
23e. Describe how the cash flow statement linked to IS and BS
Operating cash flow+Investment cash flow+Financing cash flow=Change in cash balance+Beginning cash balance=Ending cash balance
Beginning accounts receivable + Sales- Cash collections=End accounts receivable
23f. Describe the steps in preparation of two methods
cash paid for new asset=ending gross assets+gross cost of old assets sold-beginning gross assets
23g. Convert cash flows from indirect to direct method
Cash collections from customers:
1.Net sales
2.-/+ accounts receivable (indirect method) - +/- unearned revenue
Cash payments to suppliers:
1.COGS
2.depreciation or amortization included in COGS, these noncash expenses must add back
3.-/+ COGS in accounts payable
4.+/- inventory - -write-off
Major sources and uses of cash
move through life cycle
Operating cash flow
23i. Calculate and interpret free cash flow to the firm
Free cash flow to the firm
FCFF=NI+NCC+INt(1-tax rate)-FCInv -WCInv
FCFF=CFO+(Int(1-tax rate)-FCInv
Free cash flow to Equity
FCFE=CFO-FCInv+net borrowing
Performance ratio
cash flow-to-revenue=CFO/net revenue
cash return-on-assets ratio=CFO/ average total assets
cash return-on-equity ratio=CFO/average total equity
cash-to-income ratio=CFO/ operating income
Cash flow per share=CFO-preferred dividends/WACS
Coverage ratios
debt coverage=CFO/total debt
interest coverage=CFO+interest paid+ taxes pad/ interest paid
reinvestment=CFO/ cash paid for long-term
debt payment=CFO/ cash long-term debt repayment
dividend payment=CFO/ dividends paid
investing and financing=CFO/cash outflow
