Prof. Tony Bell has taught cash flow analysis in different parts. Watch all these videos one by one to learn it. Hope it will be useful for you to learn cash flow statement analysis.
Cash Flow Statement Analysis Part 1 - Video Tutorial
Cash Flow Statement Analysis Part 1 - Video Tutorial
Transcript
0:04cash flow statements um so
0:08just to begin I I think the name cash flow statement actually you know really
0:11illustrative of what is it talks about
0:14arm how much cash a company had at the beginning of the year
0:18how they spend their cash how they receive their cash their cash inflows
0:22the cash outflows
0:23and it ends with how much cash the company at the end of the year so
0:27I think that's kinda a logical description for the cash flow statement
0:31and when I was first starting to teach this I this to NASCAR a pretty good
0:35question
0:36he said well wait a minute we already have a cash flow statement because we
0:40learned how to make a cash
0:42GL account or kashti account where we have our cash is beginning balance
0:47will have some credits which of course represent
0:50cash outflows
0:53world sorry about my writing we have some
0:57davits which represent cash inflows and we have an ending balance
1:03of course in a debit I and listen said you know i
1:08this is like castles then I can see where the company's I getting their cash
1:12from I can see where they are spending their cash
1:14I know what's going on in cash by looking at the T account and its true
1:19actually if you look at the company's cash account you will understand what's
1:22going on with their cash
1:23but in an introductory accounting class we have a very simple companies with
1:28very few transactions
1:30if I look at a real company they would have styles and thousands and thousands
1:34of cash transactions in the air and the cash the account might be pages long
1:39and 2008 financial same uses it said it I want thousands of pages have cash
1:43information after
1:44synthesize it for myself hi I would like you to summarize the cash inflows in
1:49cash outflows
1:50in a logical way and that's why we have ob
1:53I cash flow statement on the cash flow statement as three sections
1:58and I'm gonna discuss Cee to those three sections in our next video will do some
2:02examples of cash
2:03stay number right now let's look at those three sections in as the
2:07operating section the investing section
2:14and the finance exact and so rather than just a listing all the transactions
2:19haphazardly or according to date were gonna
2:22classify all up to the cash related items into these three categories
2:26operating investing and finance
2:30so I'll talk about the operating section first
2:33it summarizes all other transactions that
2:36the cash related transactions that contribute towards net income
2:41so cash transactions
2:45that contribute words net income and so do you think about a company that okay
2:50like
2:51a company like wal-mart what are the cash was elated transactions that
2:54contribute to Walmart genetic
2:56well the biggest one that look for in terms of cash coming in would be getting
3:00money from their customers
3:02I you know they sell stuff to their customers our customers pay them money
3:06so
3:06the biggest %uh operating cash inflow
3:10is typically cash Cole actions
3:14from your customers is also a couple big outflows in terms the day-to-day
3:23operations and again I i was thinkin is operating section is the day to day
3:26operations in the business
3:28the biggest cash outflow in this area is typically
3:32well as a couple cash payments
3:36for expenses
3:39like operating expenses I mean things like
3:42for wal-mart paying their employees salaries keep the lights on paying the
3:46bills those day-to-day operating expenses are absolutely a cash ok so
3:50another major cash outflow for
3:53a company like wal-mart is buying their merchandise
4:00so cash payments for a call at merch
4:03thats merchandise buying the stuff that they're going to put on the shelves
4:06so I there's more than just that but those are the major
4:11operating cash flows ok up cash coming in from your customers cash payments ok
4:15for expenses and cash
4:17Enzo for merchant so operating is sorta summed up by
4:21transactions and other more than short term assets and liabilities as well as
4:27%ah at transactions that make up the company's net income
4:32the next section we're going to talk about is the investing 6+
4:36and the investing section when I think investing
4:39I think long-term assets
4:43so I am Walmart day-to-day spent a lotta money buying their merchandise selling
4:50their merchandise and make a lot of money pain of their
4:52their expenses as all day to day operations a bomb on that goes in the
4:56operating sex
4:57if wal-mart decides to open up a new store
5:00in a new city the spend millions and millions of dollars but let's be clear
5:05that's on a day-to-day operations thing that's and investing activity that's a
5:10long term thing
5:12so purchases and sales
5:15%uh long-term assets usually capital assets but still investments and other
5:19long-term assets
5:20belong in the best exact so I guess if I woulda
5:24lay it out I would say purchases
5:30and Searles 0
5:34long-term assets the final section is a financing section
5:40and here I think about long-term liabilities
5:45and I also think about shareholders equity transactions
5:48in the financing section it's all about where our money's coming from in the
5:53long term
5:54are we borrowing it from the bank are we getting it from our shareholders where's
5:58our money coming from
5:59and also payments back to the bank and payments out to shareholders are tracked
6:03in this section as well
6:05soul in terms of long-term liabilities would be any borrowing
6:10from the bank it would be any issuing new shares to shareholders
6:16course repaying the bank
6:19and repurchasing shares
6:24on the Serie purchasing are kinda the flip side of that coin
6:28and also payments out to shareholders in the form mulch
6:32dividends so those are the major categories and again I is in an
6:37exhaustive list but that's kinda how transactions have to be tracked through
6:40the cash
6:41stayed the same when he would Monday I debit cash was it a
6:44you know was it an issuance of shares in that case it's gonna financing section
6:48was that I sold an asset will Mac is a Jew going investing
6:52section was it a cash collections my customers one that case it goes in the
6:56operating section
6:57so whenever we look at transactions are we look at items we want to be able to
7:01classify
7:01side operating invest in our sign it and that's going to be key
7:06as we learn to work through the cash host on
7:10the final thing I wanna touch on before we get to an example
7:14is just a couple formats for the cash flow statement
7:18we're gonna learn to different formats for
7:21the operating section other cash flow statement so there's the three sections
7:25operating investing and financing
7:27ha operating there's two ways that that
7:30a gap allows just present the operating 6
7:34investing in financing doesn't matter which method we choose but it's the same
7:38the operating section there's two ways to present there's the direct method
7:43and there's a method called the indirect method
7:46now in my mind and in my heart
7:49I prefer the direct method I think it's better I think it makes more sense
7:53om and gap agrees with me gap in IFRS a the direct method is better
7:58so unite gets the check mark from Gap
8:01unfortunately or fortunately if you look up your favorite company on the internet
8:07most companies
8:08prefer to use the indirect method
8:12and so because this I'm gonna teach both
8:15so I'm the next video we look at I'm gonna walk you through the direct
8:18methanol explain why I think it's better
8:20%uh and then in the subsequent video walking through the indirect method Knox
8:24when I think it's not as good but
8:25you still have to know how to do in understand what it is so
8:28that's going to be the scene love these next few do's our next video we're gonna
8:33do an example
8:34and I'm gonna walk to the direct method up the operating section
8:38overcast
Cash Flow Statement Analysis Part 2 - Video Tutorial
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