Payments made into or out of a business or a financial product.
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Depicts the movement of cash in a large corporation from the perspective of a finance professional.
The cash flows received from the firms assets = cash flow given to the firms investors/creditors. Formally$$CF(A)=CF(B)+CF(S)$$Where:
-
$A$ is the assets of the firm -
$B$ is the bondholders -
$S$ is the stockholders
The financial cash flow statement starts with Operating cash flow, which is given by $$\text{Operating Cash Flow}=\text{EBIT}+\text{D&A}-\text{Taxes}$$Obtained from the [[Income statement]] and the [[Balance sheet]]. This is an inflow of cash into the business.
Capital spending is the amount spent on the acquisition of new fixed assets less sales of fixed assets. Positive capital spending implies that money has left the business in order to buy new assets.
OCF less capital spending less increase in [[Net working capital]] gives the cash flow from the assets/operating activities of the firm
The cash flow for debt is given by: interest payments + retirement of debt (repayment of the principal) less long term debt funding.
The cash flow for equity is given by: Dividends paid + stock buybacks less new shares of stock issued.
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Depicts the movement of cash in a large corporation from the perspective of an accountant. The accounting statement of cash flows has 3 main parts.
- Cash flows from operating activities
- Cash flows from investing activities
- Cash flows from financing activities
Starts from Net Income from the [[Income statement]]. All [[Income statement#Non-Cash items|non cash items]] (D&A and deferred taxes) are added to it less increase in [[Net working capital]]. This gives the operating cash flow of the business.
It is important to note that the net income already includes a deduction for interest expenditure. Therefore interest is not included under the financing activities section, unlike in the [[Cash flows#Cash flows of the firm]] statement.
The cash flow from the sales of old and acquisition of new fixed assets.
Cash flows to and from investors.
Debt: Proceeds from new debt issued less Retirement of long term debt Equity: Proceeds from new shares issued less dividend payments less stock buybacks
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