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35 Cards in this Set

  • Front
  • Back
Primary Purpose of Operating Activities
Source of Cash
Primary Purpose of Investing Activites
Use of Cash (Buy PP&E, other Investments)
Primary Purpose of Financing Activities
Source of Cash (Borrow Money, Sell stock)
Inflow
Cash going in- does not have brackets
Outflow
Cash going out- has brackets
SCF- importantance (5 points)
1. Capacity to meet obligations for cash.
2. Ability to generate cash flow in the future.
3. Effectiveness in implementing investing & financing strategies.
4. Success in productively managing investing activites
5. Future external financing needs
SCF Facts
Period of time
Usually 3 years of data
All are Operating, Financing or Investing activities.
Indirect SCF
Reconciles net income on an accrual basis with cash flow from operating activites on a cash basis.
Difference between Indirect or direct format
Operating Section
SCF Operating Section
1. begins with Net Income/Loss
2. Analysis of the INcome Statement non cash expenses
3. Analysis of the balance sheet, current assets and current liabilities
Investing Activities
Analysis of long-term assets
Buying and Selling
External Financing
Anaysis of long-term liabilities & stockholders' equity
Debt and equity transactions
Positive cash flows from operating activities
Indicative of mature industry
Net income is most likely positive
Positive Cash flows from investing activities
Assets are being sold
ay not be much opportunity for growth/expansion
operations being downsized
asset GR negative
Negative cash flows from financing activities
Creditors and/or owner are being paid off
Primary Purpose of Operating Activities
Source of Cash
Primary Purpose of Investing Activites
Use of Cash (Buy PP&E, other Investments)
Primary Purpose of Financing Activities
Source of Cash (Borrow Money, Sell stock)
Inflow
Cash going in- does not have brackets
Outflow
Cash going out- has brackets
SCF- importantance (5 points)
1. Capacity to meet obligations for cash.
2. Ability to generate cash flow in the future.
3. Effectiveness in implementing investing & financing strategies.
4. Success in productively managing investing activites
5. Future external financing needs
SCF Facts
Period of time
Usually 3 years of data
All are Operating, Financing or Investing activities.
Indirect SCF
Reconciles net income on an accrual basis with cash flow from operating activites on a cash basis.
Difference between Indirect or direct format
Operating Section
SCF Operating Section
1. begins with Net Income/Loss
2. Analysis of the INcome Statement non cash expenses
3. Analysis of the balance sheet, current assets and current liabilities
Investing Activities
Analysis of long-term assets
Buying and Selling
External Financing
Anaysis of long-term liabilities & stockholders' equity
Debt and equity transactions
Positive cash flows from operating activities
Indicative of mature industry
Net income is most likely positive
Positive Cash flows from investing activities
Assets are being sold
ay not be much opportunity for growth/expansion
operations being downsized
asset GR negative
Negative cash flows from financing activities
Creditors and/or owner are being paid off
Asset increase
Asset decrease
Liability Increase
Liability decrease
Cash flow decrease (brackets)
Cash flow increase
Cash flow increase
Cash flow decrease
What do you want Cash flow patterns to look like
Operating Cash FLows Positive
Investing Cash Flows Negative
Financing Cash Flows Negative
Company is prosperous and mature, growing by investing in long-term assets, using financing to take advantage of opportunties.
Cash inflow
Asset Decrease
Liability Increase
S/E Increase
Cash Outflow
Asset Increase
Liability Decrease
S/E Decrease
2 Rules of Cash Flow
Large operating cash flow relative to N/I usually indicates good financial performance

Cash flow from operating activities normally is ppproximately = to cash from from investing activities + cash flow from financing activities