Cash flow Analysis - T. Kelly

Cash Flow Analysis

Time is Money!

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What is meant by this statement -->

Cash Flow Definition

the total amount of money being transferred into and out of a business, especially as affecting liquidity.

Liquidity

Liquidity refers to the ease with which an asset, or security, can be converted into ready cash without affecting its market price.

Inflows & Outflows

Businesses have income and expenses - what do you think their goal is?

Our Destination----->

• Why is this important?

• How do we measure?

• How do we communicate to stakeholders?

Homework:

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There are three parts to the Statement of Cash Flows (or Cash Flow Statement):

•    1. Operating Activities   2. Investing Activities   3. Financing Activities  

Operating Activities

• Total sales of goods and services collected during a period

• Payments made to suppliers of goods and services used in production settled during a period

• Payments to employees or other expenses made during a period

Investing Activities

• payments made to purchase long-term assets, as well as cash received from the sale of long-term assets.

• Examples of investing activities are the purchase or sale of a fixed asset or property, plant, and equipment and...

• the purchase or sale of a security issued by another entity.

Financing Activities

• Financing activities consist of activities that will alter the equity or borrowings of a company.

• Examples of financing activities include the sale of a company's shares or the repurchase of its shares.

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Two Methods of Determining Cash Flow

1. Direct Method

2. Indirect Method