Lecture 12 Cash Flow Statements

Lecture 12 Cash Flow Statements - LECTURE 12 CASH FLOW...

Info iconThis preview shows pages 1–7. Sign up to view the full content.

View Full Document Right Arrow Icon
LECTURE 12 CASH FLOW STATEMENTS MGCR 211
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
User Relevance Important to Creditors Can assess the level of cash flows available to repay debt (operating cf / debt ratio) Important to Investors Will help assess the presence of any potential liquidity issue Can also assess the level of growth of the company (asset purchases) Important to Management Can evaluate the use of cash made by the company. Are the activities of the companies sustainable?
Background image of page 2
Cash Flow and Net Income reconciliation Net income is based on accrual accounting and doesn’t necessarily represent the cash flows for the period. Cash flow represents all physical movement of cash that occurred from the company’s bank account during the period. When analyzing financial statements, it is important to consider both statements to get a better idea of the position of the firm.
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Cash Flow Statement Cash flow statement measures the change in the cash and cash equivalent position of the firm. Cash equivalent are highly liquid current assets that can be converted into cash in 3 months or less. Over time, CF = NI
Background image of page 4
Cash Flows Positive cash flows: Company received more cash than it paid in the period. Negative cash flows: Company received less cash than it paid in the period.
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Cash Flow example The following transaction occurred during the month of October.
Background image of page 6
Image of page 7
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 09/12/2011 for the course MGCR 211 taught by Professor La rocca during the Fall '08 term at McGill.

Page1 / 22

Lecture 12 Cash Flow Statements - LECTURE 12 CASH FLOW...

This preview shows document pages 1 - 7. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online