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Lesson 19: Analyzing Cash Flow
Lesson 19: Analyzing Cash Flow
Lesson 19: Analyzing Cash Flow
Lesson 19: Analyzing Cash Flow
Lesson 19: Analyzing Cash Flow
Lesson 19: Analyzing Cash Flow
Lesson 19: Analyzing Cash Flow
Lesson 19: Analyzing Cash Flow
Lesson 19: Analyzing Cash Flow
Lesson 19: Analyzing Cash Flow
Lesson 19: Analyzing Cash Flow
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Lesson 19: Analyzing Cash Flow

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Watch this with a 10-15 minute audiotrack at http://vimeo.com/novusprogram/lesson19 …

Watch this with a 10-15 minute audiotrack at http://vimeo.com/novusprogram/lesson19

This lesson is focused on understanding the structure and importance of a Cash Flow Statement. The lesson covers the three main sections of a Cash Flow Statement: Operational, Financing, and Investing. The differences between the Cash Flow Statement and other financial statements are discussed, as are the relationships.

The Novus project is a combination of video tutorials designed to be used in conjunction with a free business simulation software program. The Novus Business and IT Program contains 36 business and IT training videos, covering basic finance, accounting, marketing, economics, business strategy, Word, Excel, and PowerPoint. Users will have an opportunity to apply the lessons in the Novus Business Simulator. Over six rounds, the user or teams will have to make decisions on capital purchases, financing, production, financing, and human resources for a microbrewery. This channel has arranged the 36 video lessons into the order in which they are meant to be used with the simulator. To watch this slideshow as a video, please go to our Vimeo page at: https://vimeo.com/novusprogram. To download our free business simulation software, please go to our SourceForge page at: http://sourceforge.net/projects/novus/.

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  • 1. Analyzing Cash Flow Objective: To show how cash flow statements segregate operating, investing and financing transactions and to understand how cash flow information can help make better management and investing decisions.Novus Business and IT Training Program
  • 2. The Cash Flow Statement Operating Investing Financing Cash Flow Cash Flow Cash FlowNovus Business and IT Training Program 1
  • 3. The Cash Flow StatementInflows: Outflows:• Sales Operating • Raw materials• Receivables paid purchased Cash Flow • Salaries • Rent • Interest on loans • Taxes Novus Business and IT Training Program 2
  • 4. The Cash Flow Statement Star Hat Store Cash Flow Statement Year Ending Year Ending 31-Dec-2011 31-Dec-2010 Operating Cash Flows Sales 99,000 62,000 Accounts Receivables collected 25,000 8,000 Hats bought from Manufacturer (86,000) (60,000) Salaries (10,000) (8,000) Interest on Loans (8,000) - Selling General and Admin (5,000) (24,000) Taxes Paid (2,400) (300) Cash Flow from Operations 12,600 (22,300) Investing Cash Flows Purchase of Truck (32,000) Purchase of Display Case (60,000) - Cash Flow from Investing (60,000) (32,000) Financing Cash Flows Partner investment - 150,000 Loan from bank 60,000 - Cash flow from Financing 60,000 150,000 Net Cash Flow 12,600 95,700Novus Business and IT Training Program 3
  • 5. Cash Flow vs. Income Statement Star Hat Store Cash Flow Statement Star Hat Store Income Statement Year Ending Year Ending Year Ending Year Ending 31-Dec-2011 31-Dec-2010 31-Dec-2011 31-Dec-2010Operating Cash Flows Sales 99,000 62,000 Sales 100,000 80,000 Accounts Receivables collected 25,000 8,000 Cost of Goods Sold - 65,000 55,000 Hats bought from Manufacturer (86,000) (60,000) Salaries (10,000) (8,000) Gross Income = 35,000 25,000 Interest on Loans (8,000) - Selling General and - 15,000 15,000 Selling General and Admin (5,000) (24,000) Admin Expenses Taxes Paid (2,400) (300)Cash Flow from Operations 12,600 (22,300) Operating Income = 20,000 10,000 Other Income and Exp - 8,000 8,000Investing Cash Flows Purchase of Truck (32,000) Pre-Tax Income = 12,000 2,000 Purchase of Display Case (60,000) - Taxes - 2,400 400Cash Flow from Investing (60,000) (32,000) Net Income = 9,600 1,600Financing Cash Flows Partner investment - 150,000 Loan from bank 60,000 -Cash flow from Financing 60,000 150,000Net Cash Flow 12,600 95,700Novus Business and IT Training Program 4
  • 6. The Cash Flow StatementInflows: Outflows:• Sale of real estate Investing • Purchase of real• Sales of Cash Flow estate plant/equipment • Purchase of• Sale of financial plant/equipment investments • Purchase of financial• Payments related to investments mergers or acquisitions Novus Business and IT Training Program 5
  • 7. The Cash Flow Statement Star Hat Store Cash Flow Statement Year Ending Year Ending 31-Dec-2011 31-Dec-2010 Operating Cash Flows Sales 99,000 62,000 Accounts Receivables collected 25,000 8,000 Hats bought from Manufacturer (86,000) (60,000) Salaries (10,000) (8,000) Interest on Loans (8,000) - Selling General and Admin (5,000) (24,000) Taxes Paid (2,400) (300) Cash Flow from Operations 12,600 (22,300) Investing Cash Flows Purchase of Truck (32,000) Purchase of Display Case (60,000) - Cash Flow from Investing (60,000) (32,000) Financing Cash Flows Partner investment - 150,000 Loan from bank 60,000 - Cash flow from Financing 60,000 150,000 Net Cash Flow 12,600 95,700Novus Business and IT Training Program 6
  • 8. The Cash Flow StatementInflows: Outflows:• Cash invested by Financing • Dividends paid owners • Loans given• Cash from stock Cash Flow • Stock repurchased offerings• Loans received• Cash from bonds issued Novus Business and IT Training Program 7
  • 9. The Cash Flow Statement Star Hat Store Cash Flow Statement Year Ending Year Ending 31-Dec-2011 31-Dec-2010 Operating Cash Flows Sales 99,000 62,000 Accounts Receivables collected 25,000 8,000 Hats bought from Manufacturer (86,000) (60,000) Salaries (10,000) (8,000) Interest on Loans (8,000) - Selling General and Admin (5,000) (24,000) Taxes Paid (2,400) (300) Cash Flow from Operations 12,600 (22,300) Investing Cash Flows Purchase of Truck (32,000) Purchase of Display Case (60,000) - Cash Flow from Investing (60,000) (32,000) Financing Cash Flows Partner investment - 150,000 Loan from bank 60,000 - Cash flow from Financing 60,000 150,000 Net Cash Flow 12,600 95,700Novus Business and IT Training Program 8
  • 10. The Cash Flow Statement Star Hat Store Cash Flow Statement Year Ending Year Ending 31-Dec-2011 31-Dec-2010 Operating Cash Flows Sales 99,000 62,000 Accounts Receivables collected 25,000 8,000 Hats bought from Manufacturer (86,000) (60,000) Salaries (10,000) (8,000) Interest on Loans (8,000) - Selling General and Admin (5,000) (24,000) Taxes Paid (2,400) (300) Cash Flow from Operations 12,600 (22,300) Investing Cash Flows Purchase of Truck (32,000) Purchase of Display Case (60,000) - Cash Flow from Investing (60,000) (32,000) Financing Cash Flows Partner investment - 150,000 Loan from bank 60,000 - Cash flow from Financing 60,000 150,000 Net Cash Flow 12,600 95,700Novus Business and IT Training Program 9
  • 11. The Cash Flow Statement ABC Company Cash Flow Statement Year Ending Year Ending 31-Dec-2011 31-Dec-2010 Operating Cash Flows Net Income 1,890,000 1,622,000 Additions to Cash Depreciation 14,000 13,500 Decrease in Accounts Receivable 12,500 36,000 Increase in Accounts Payable 24,000 44,800 Increase in Taxes Payable 2,000 1,700 Subtractions from Cash Increase in Inventory (32,000) (55,000) Cash Flow from Operations 1,910,500 1,663,000 Investing Cash Flows Purchase of Equipment (76,000) (225,000) Sale of Equipment 69,200 - Cash Flow from Investing (6,800) (225,000) Financing Cash Flows Loan from bank 85,000 - Dividends paid (44,000) 44,000 Cash from Financing 41,000 44,000 Net Cash Flow 1,944,700 1,482,000Novus Business and IT Training Program 10

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