The Cash Flow Statement - PowerPoint PPT Presentation

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The Cash Flow Statement

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The Motley Fool Investment Workbook. A Cash Flow Statement (Lowe's) www.investorwords.com ... Considered by some experts to be a better measure than earnings ... – PowerPoint PPT presentation

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Title: The Cash Flow Statement


1
The Cash Flow Statement
  • Crow River Investment Club
  • June 10, 2003

2
References
  • The Motley Fool Investment Workbook
  • A Cash Flow Statement (Lowes)
  • www.investorwords.com

3
Agenda
  • Purpose
  • Terms
  • Analysis

4
Purpose
  • Indicator of financial health of company
  • Considered by some experts to be a better measure
    than earnings
  • Shows the directional flow of money
  • Where it comes from
  • Where it goes

5
Basic Overview
  • Net income
  • Add Depreciation
  • Subtract non-cash assets
  • Add current liabilities that havent been paid
  • Result -gt an understanding of cash flow

6
Basic Terms
  • Net income
  • From the income statement
  • Depreciation
  • Loss of value of previous purchase
  • Accounts receivable
  • What is still owed to the company
  • Remember -gt an increase may mean the company
    isnt effectively collecting for its product
  • Inventory
  • What the company still owns
  • Increasing inventory means the company is
    producing faster than its selling
  • Cash Provided by Operations
  • Should be positive and rising
  • If negative, indicates company cannot fund growth
    from internal means

7
Basic Analysis
  • Free Cash Flow
  • (Cash Provided by Operations) (Dividends Paid)
    (PPE)
  • Measure the means a company has to increase
    shareholder value
  • Stock re-purchase
  • Debt reduction
  • Acquisition

8
CF Example - LOW
  • Cash Flows from Operating Activities
  • FY02 FY01
  • Net Earnings 1471 1023
  • Adjustments to Reconcile Net Earnings to Net Cash
  • Provided by Operating Activities
  • Depreciation and Amortization 645 534
  • Deferred Income Taxes 208 42
  • Loss on Disposition/Writedown of Assets 18 39
  • Tax Effect of Stock Options Exercised 29 35
  • Changes in Operating Assets and Liabilities
  • Accounts Receivable Net (6) (5)
  • Merchandise Inventory (357) (326)
  • Other Operating Assets (41) (37)
  • Accounts Payable 228 1
  • Employee Retirement Plans 40 114
  • Other Operating Liabilities 461 193
  • Net Cash Provided by Operating Activities 2696 1
    613

9
Additional Notes
  • Cash Flows from Investing Activities
  • Shows how company spends cash
  • Cash Flows from Financing Activities
  • Shows impact of debt reduction or issue
  • Shows cost of dividend payments
  • Cash and Cash Equivalents
  • Reflects same line on balance sheet

10
Free Cash Flow
  • Free Cash Flow
  • (Cash Provided by Operations) (Dividends Paid)
    (PPE)
  • 2696 66 2362
  • 268 Million in FY02

11
Next Month Bringing it all together - Lynn
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