Professional Documents
Culture Documents
Income Statement
Balance Sheet
How were proceeds of debt or stock used? How were expansions financed? How was the retirement of debt accomplished? How much money was borrowed?
Ex: Overall A/P increased for the year. Thus, add back increase in A/P to N/I. Ex: Overall A/R increased for the year. Thus subtract out the increase in A/R from N/I
Current Assets:
Increase -> Use of cash -> subtract Decrease -> Source of cash -> add Increase -> Source of cash -> add Decrease -> Use of cash -> subtract
Current Liabilities:
Translation Acquisitions
Consider where company is in its lifecycle Summary analysis by Inflows and Outflows
Overall comparison of inflows and outflows w/in and across years Where is cash coming from and where is it going? Line by line explanation, focus on large items
Section by section:
Analyzing the SCF Overall: Summary of Inflows & Outflows (Fig. 4.6)
2009 % 2008 % 2007 %
Inflows:
Operations Sale of Mkt Sec Sales of LT assets Sales of C/S Adds to Debt Total
Outflows:
Operation Purchase of PPE Purchase of Mkt Sec Repmts of Debt Dividends Pd Total
Do summary analysis of inflows and outflows for Starbucks. (Refer to the work you did on 4.12 as background.)
Look at adjustments
Non-cash charges Are increases to cash sustainable? Look at working capital items. Look at changes in context of revenue trends and company lifecycle
Bottom line: The higher the correlation of N/I with cash provided by ops, the higher the quality of earnings tends to be.
Note: Cash flow must be looked at in light of the developmental stage of the company
Aims to assess cash needs for current operations AND expansion with new capital investment. Many possible measures
Ex: Cash flows from ops capital expenditure dividends Take great care in using this!
Other companies
Lets look at your companies