4 44 Calculating Free Cash Flow from the Cash Flow Statement Nike Inc Add net

4 44 calculating free cash flow from the cash flow

This preview shows page 44 - 52 out of 52 pages.

4-44 Calculating Free Cash Flow from the Cash Flow Statement : Nike, Inc. Add net interest payments after tax back in to CFO Reverse the impact of net interest-bearing securities
Image of page 44
4-45 Converting Earnings to Free Cash Flows: Nike, Inc. Cash flow from Operations
Image of page 45
4-46 A Common Approximation - FCF We can approximate by dealing with accruals separately. Note we get very different numbers, since not all investing expenses are dealt with.
Image of page 46
Features of the Income Statement Revenue Accruals Value added that is not cash flow Adjustments to cash inflows that are not value added 1. Dividends don’t affect income 2. Investment doesn’t affect income 3. There is a matching of Value added (revenues) Value lost (expenses) Net value added (net income) 4. Accruals adjust cash flows ExpenseAccruals Value decreases that are not cash flow Adjustments to cash outflows that are not value added 4-47
Image of page 47
4-48 The Income Statement: Nike, Inc . Top Line Bottom Line
Image of page 48
The Revenue Calculation Revenue = Cash receipts from sales + New sales on credit Cash received for previous periods' sales Estimated sales returns and rebates Deferred revenue for cash received in advance of sale + Revenue previously deferred 4-49
Image of page 49
The Expense Calculation Expense = Cash paid for expenses + Amounts incurred in generating revenue but not yet paid Cash paid for generating revenues in future periods + Amounts paid in the past for generating revenues in the current period 4-50
Image of page 50
Earnings and Cash Flows Earnings from the business (operating earnings) = Earnings + Net interest (after tax) = Free cash flow + investment + accruals = [C - I]+ I + accruals The earnings calculation adds back investments and puts them back in the balance sheet. It also adds accruals. 4-51
Image of page 51
Earnings and Cash Flows: Nike, Inc., 2010 4-52 We can double-check that our accounting is correct by comparing earnings to FCF
Image of page 52

You've reached the end of your free preview.

Want to read all 52 pages?

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern

Stuck? We have tutors online 24/7 who can help you get unstuck.
A+ icon
Ask Expert Tutors You can ask You can ask You can ask (will expire )
Answers in as fast as 15 minutes