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ashflownalysis

Rini Novrianti Sutardjo Tui

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Business Cashflow

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Constructing Cashflow

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Operating Activities

Buyinginventory

Producingand selling

product

Payingexpensesand taxes

Collectingcredit sales

Focus ofactivities is

generatingnet income

thebeginning of

a cashflowstatement.

Involves activities firm doeson a day-to-day basis

Money from operatingtransactions runs through

current balance sheet accounts

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Operating Activities

Example of cashflow from operating activities

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Investing Activities

Typicallyincludepurchasingfixed assets

Examine thechange ingross fixedassets, notnet fixedassets

Because the

net valueincludes anadjustmentfordepreciation

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Financing Activities

Deal with the capital accounts, long-term debt and equity

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Free Cashflow

Under normal conditions most firms generate positive cash flow fromoperations

Some of these funds are used to maintain long-run competitive position

Replace worn-outfixed assets

Pay dividends onpreferred stock

Cash generatedbeyond reinvestment

needs

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Free Cashflow

After TaxOperating

CashFlows

Investmentin Assets

FreeCashFlow

Investmentin Net

OperatingWorking

Capital

Investmentin Fixed

Assets andOther

Assets

Investmentin Assets

Free Cash Flow (FCF) is the amount of cash flow

available to debt and equity holders aftermeeting all operating needs and paying for itsinvestment in net operating working capital and

fixed assets and other assets

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After Tax Cashflow Calculation

Revenue

- Operating costs- Capital costs

Before-tax cashflow

- Income tax

After-tax cashflow

Revenue- Operating costs

- Depreciation

- Depletion

- Amortization

- Write-offs

Taxable income

- Income tax

+ Depreciation

+ Depletion+ Amortization

+ Write-offs

- Capital costs

After-tax cashflow

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Business Costs to be Expensed

Tax Benefit

Could be deducted in fullin the year incurred

OperatingCosts

ResearchExperiment.

Costs

MiningExpl.Costs

MiningDevlp.Costs

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Financial Situations that Affect Cashflow

Cashflow

Beforetax

Expense

Stand-alone

Carry-forward

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