Educational Component Cash Flow Statement April 5 th

Educational Component Cash Flow Statement April 5 th, 2015

Recap Financial Statements Income Stateme nt Balance Sheet Cash Flow Stateme nt

Cash Flow Statement Answers 3 questions: Where did the cash come from? What was the cash used for? What was the change in the cash balance? Used to access company’s liquidity, operating capabilities and risk Demonstrates the quality of company’s income Company might have high net income on IS but have no cash to meet its short term liabilities

Where does cash come from? Issuing bonds and stocks Selling T-Shirts Sale of assets (equipment ) Olena’ s TShirt store Interest, income and dividends Accounts receivables

What is cash used for? Repurchase the stock Acquire property, plant, equipment Purchase of businesses Dividend payment Production of T-Shirts Olena’ s TShirt store Repay debt

Example: Tesla Motors, Inc. http: //ir. teslamotors. com/secfiling. cfm? filing. ID=15645 90 -16 -13195&CIK=1318605#TSLA 10 K_20151231_HTM_ITEM_8

Components of CFS 1. Operating activities 2. Investing activities 3. Financing activities • Cash from regular business operations • Drives income • Purchase/sale of assets • Acquisitions • “CAPEX” • • Pay dividends Pay off the debt Retire stocks Issue bonds, stocks

Connecting financial statements Related to balance sheet and income statement : Balance sheet: net cash flow should equal the difference between 2 consecutive balance sheets Income statement: cash flow from operating activities starts with net income from the income statement Go/sic Documents to find Excel with an example of simplified cash flow

Summary Cash flow demonstrates company’s : operating, financing, investing transactions ability to generate future cash flow ability to meet its obligations and pay dividends need for external financing !!Careful!! companies may make cash flow look more attractive for better credit rating