1Video: 3.1.1: Operating Investing and Financing Cash FlowsHello, I’m Professor Brain Bushee, welcome back. This week we’re going to spend theentire week talking about the Statement of Cash Flows. And we’re going to need thewhole week to get through it.In this first video, we’re going to talk about how to classify transactions into operating,investing, and financing activities.Which is the first step toward putting together and then analyzing the statement of cashflows. We’ve got a lot of work to do so lets get to it.The statement of cash flows is going to report changes in cash due to operating,investing and financing activities over a period of time.So a period like a fiscal quarter or a fiscal year, any period between balance sheetdates.Statement has the following format:Kicks of with net cash from operating activities, then cash from investingactivities,and cash from financing activities.You add them all up and that should be the sane as the net change in cashbalance.If the company does any non-cash transactions.olike the trade a piece of land for a building.oThose have to be disclosed at the bottom of the statement of cash flows.oTwo other required disclosures. Companies must tell you cash interestpaid and cash income taxes paid, for reasons that we’ll talk about in latervideos.But these disclosures either will appear at the bottom of the cashflow statement or somewhere else in the footnotes.>>Cash is cash. It is what is is. Why divide it into three threecategories?You professors just have too much time on your hands.Do you always have to make everything so difficult?>>Remember back to one of the first videos in the course.We looked at this example, Dave’s Transport Service. In thatexample we saw why it’s important not to look at total cashflow.Because all Dave had to do to increase his total cash flow iseither borrow more money or raise more equity.What we really want to know is how much cash flow is beinggenerated by operating the business
2How much cash flow is the business investing in the future?