Unlocking Financial Statements (2012) - Day 4 by Jimmy Gentry


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Jimmy Gentry presents Day Four of "Unlocking Financial Statements," a free, weeklong webinar series hosted by the Donald W. Reynolds National Center for Business Journalism.

This training covers income statements, balance sheets, cash flows and tips for finding stories in corporate filings.

For more information about free training for business journalists, please visit businessjournalism.org.

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Unlocking Financial Statements (2012) - Day 4 by Jimmy Gentry

  1. 1. UnlockingFinancial Statements Day 4
  2. 2. Schedule for Week Day 1: Introduction to financial statements Day 2: Income statement Day 3: Balance sheet Day 4: Cash flows Day 5: Beyond the basics Understanding Financial Statements 2
  3. 3. Statement of Cash Flows Understanding Financial Statements 3
  4. 4. Accrual Method Records revenues as soon as the “sale” occurs Records expenses as soon as the bill is received IE, transactions enter the financial records when they occur, not when cash changes hands Accrual method, therefore, shows “scores,” not real spendable dollars Understanding Financial Statements 4
  5. 5. Statement of Cash Flows Record of cash provided by cash sources and of cash consumed by cash uses. Understanding Financial Statements 5
  6. 6. Cash Flows (cont.) Information about use of cash Information about investing and financing Ability to continue as a going concern Ability to generate future positive cash flows Ability to meet obligations and pay dividends Understanding Financial Statements 6
  7. 7. Cash Flows From operations From investing From financing Understanding Financial Statements 7
  8. 8. Flexibility Companies have some flexibility in categories for entries. Total change in cash, however, will not change. Overwhelming majority of all accounting standards deal with balance sheet and income statement, not cash flows statement. Understanding Financial Statements 8
  9. 9. Cash and Cash Equivalents The category Cash and Cash Equivalents shows how much “cash” the company had at the start or end of a period. Note the changes in this category. Understanding Financial Statements 9
  10. 10. Free Cash Powerful tool for making a company successful Powerful indicator for investors Cash that is left over after productive capacity is maintained or expanded Permits expansion, paying down debt, buying back shares, etc. Understanding Financial Statements 10
  11. 11. Free Cash Several ways to calculate it Companies create their own models Gross way to do it:  Cash from operating activities  Minus capital expenditures  Equals free cash flow Understanding Financial Statements 11
  12. 12. American Standard Model Cash from operating activities Minus capital expenditures Plus proceeds from disposal of property Plus proceeds from sale and leasebacks Equals free cash flow Understanding Financial Statements 12
  13. 13. VF Model Cash from operating Minus cash used in investing Understanding Financial Statements 13
  14. 14. Finding Company’s Formula Often requires you to do some digging in the 10-K Understanding Financial Statements 14
  15. 15. Presented by: James K. Gentry, Ph.D. Clyde M. Reed Teaching Professor School of Journalism and Mass Communications University of Kansas jgentry@ku.edu Understanding Financial Statements 15