is it just me or cash flow statement is difficult to master in a day or two, I spent 2 hours everyday for 4 days and still did mange everything about it yet! any advice is very much appreciated.
well i obviously cant explain it to you, thats what the book is for, but i can only tell you that with time nothing in level 1 is hard, close the FRA book… grab another book , master it, go back to FRA, do another book, then go back to FRA… just give it time… and if you have specific questions you can email me… do waste your time on any 1 idea, 2 hrs a day for 4 days !!! master something else, something with high mariginal utility for time !! email@example.com
High Level CFO - Items crucial to run the business. AR, AP, Invent, etc. CFI - Items related to long term business items. PPE, Ownership in other businesses. CFF - Items related to company financing - LTD, Equity, etc. CFO better be positive. CFI is usually negative. CFF is usually negative. To calculate CFO, start with Net income, add depr, and add/subtract changes in the current asset/liability accounts. Do likewise for CFI (PPE) and CFF (LTD and Equity). Any other questions?
Here’s a general way to look at it. For the most part, anything affecting current assets and liabilities is operating, so those changes are going to be CFO (except cash of course). Also be sure to include non-cash items from the income statement (depreciation, amortization, impairments, etc.). Non-current assets are typically gong to be investments, right? Think about it - PP&E, notes receivable, etc. Changes in those accounts all go to CFI. Buy equipment? It goes there. Sell equipment, same thing. Non-current liabilities and owners equity consist are financing activities (makes sense, doesn’t it?). Any transactions affecting those accounts goes to CFF. There are some nuances of course, but if you divide the balance sheet into these three sections, you won’t be far off the mark.
Thanks to you all, Because it is all new to me, I think I will go through it again and comeback with more specific questions. Thanks