How to Read and Interpret a Cash Flow Statement: A Step-by-Step Guide
17.6 هزار بار بازدید -
4 سال پیش
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What is the cash flow
What is the cash flow statement and why is it important? We walk through a real-life example to explain the cash flow statement and understand how a company generates and uses cash, and for what reasons.
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WHAT IS THE CASH FLOW STATEMENT?
In my experience, the cash flow statement is the least understood financial statement among finance and especially accounting professionals. This is a missed opportunity because the statement of cash flows very elegantly and simply explains to us the sources and uses of cash of any company.
So this video is basically the cash flow statement explained for dummies, with an example.
What does the cash flow statement show? We have the following three main sections which summarize and help us analyze all the main activities of a company:
OPERATING ACTIVITIES
This section tells us how much cash the company generates from its core business. So this is the cash the business makes from selling its products, and covering its immediate and short-term expenses, i.e. the cash flow from selling and delivering the product/service.
INVESTING ACTIVITIES
The investing section tells us about where the company invests its own cash, i.e. what assets/property it bought, if it acquired other businesses, or made any other type of investments.
FINANCING ACTIVITIES
Does the company rely on outside investors to finance itself? The financing activities show our investments in the company -- debt (raised, or paid off), equity raised, or anything else used to finance the company.
Between these three sections, you can understand why is the cash flow statement important. It shows us how our business generates cash, where we invest in it, and who invests in our business.
*BONUS KPI: FREE CASH FLOW
The free cash flow metric, calculated as operating cash flow minus investing cash flow, has become one of the most closely watched cash flow metrics over the last few decades. Why? It gives us the cash available to the owners of the company to do anything they want with - like paying dividends, buying back shares, etc. We break this down key metric in the video!
I hope that you can now feel confident reading and understanding the cash flow statement. If you have questions (I'm sure you do) - please leave comments below and I'll try to help.
► Subscribe for more finance videos: https://bit.ly/EricAndrewsSubscribe
#cashflowstatement #freecashflow
👉 Check out my courses to help you master Excel in a weekend: https://www.ericandrewsstartups.com/c...
🚀 If you want to master the finance skills & frameworks to successfully scale technology startups, secure your spot in my "Finance for Startups" program, today: https://www.ericandrewsstartups.com/f...
Communities:
💼 Linkedin: LinkedIn: eric-andrews-1624b656
☑️ Twitter/X: Twitter: eric__andrews
🌟 Instagram: Instagram: ericandrews_startups
🔥 Discord: https://bit.ly/discord_eric
💻 Newsletter: https://bit.ly/joinericnewsletter
🎥 Clips: @ericandrewsclips7818
Related Finance Videos:
🚩 Understanding Free Cash Flow for Startups: Understanding Free Cash Flow for Star...
▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬
WHAT IS THE CASH FLOW STATEMENT?
In my experience, the cash flow statement is the least understood financial statement among finance and especially accounting professionals. This is a missed opportunity because the statement of cash flows very elegantly and simply explains to us the sources and uses of cash of any company.
So this video is basically the cash flow statement explained for dummies, with an example.
What does the cash flow statement show? We have the following three main sections which summarize and help us analyze all the main activities of a company:
OPERATING ACTIVITIES
This section tells us how much cash the company generates from its core business. So this is the cash the business makes from selling its products, and covering its immediate and short-term expenses, i.e. the cash flow from selling and delivering the product/service.
INVESTING ACTIVITIES
The investing section tells us about where the company invests its own cash, i.e. what assets/property it bought, if it acquired other businesses, or made any other type of investments.
FINANCING ACTIVITIES
Does the company rely on outside investors to finance itself? The financing activities show our investments in the company -- debt (raised, or paid off), equity raised, or anything else used to finance the company.
Between these three sections, you can understand why is the cash flow statement important. It shows us how our business generates cash, where we invest in it, and who invests in our business.
*BONUS KPI: FREE CASH FLOW
The free cash flow metric, calculated as operating cash flow minus investing cash flow, has become one of the most closely watched cash flow metrics over the last few decades. Why? It gives us the cash available to the owners of the company to do anything they want with - like paying dividends, buying back shares, etc. We break this down key metric in the video!
I hope that you can now feel confident reading and understanding the cash flow statement. If you have questions (I'm sure you do) - please leave comments below and I'll try to help.
► Subscribe for more finance videos: https://bit.ly/EricAndrewsSubscribe
#cashflowstatement #freecashflow
4 سال پیش
در تاریخ 1399/08/13 منتشر شده
است.
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