Join Jim Stice for an in-depth discussion in this video Apple: Cash flow data help unravel accounting issues, part of Running a Profitable Business: Understanding Cash Flow.
- Let's see how cash flow analysis…can help us see through the impact…of opaque accounting rules.…Before 2009, Apple was required to record revenue…from its iPhone sales…using something called subscription accounting.…Under this approach, Apple was required…to spread the revenue for an iPhone sale for, say, $600…evenly over the entire life of the transaction.…Because each iPhone was accompanied by a promise of…free future software upgrades…the iPhone sale was not a one and done thing,…at least not according to the accounting rules.…
With a four year expected life of an iPhone,…Apple would have had to drag out the iPhone revenue…$150 per year, for a phone that had already…been delivered to a customer years before.…If this sounds weird to you,…you're in good company.…Lots of people were mystified about an accounting rule…that would not let Apple immediately report…the sale of a $600 iPhone.…It seems like a straightforward transaction.…The nebulous promise of future free software upgrades…shouldn't change the reporting of the sale,…
Want to hear more from Jim and Kay? Learn about all three types of accounting—financial, managerial, and income tax—in their Accounting Fundamentals course.
- Differentiating between net income and operating cash flow
- Categorizing cash flow
- Using financial data to deduce cash flow
- Managing operating, investing, and financing cash flows
- Typical cash flow patterns
- Converting net income into operating cash flow
- Improving operating cash flow
Skill Level Intermediate
1. The Importance of Cash Flow Analysis
2. Overview of the Statement of Cash Flows
3. Using Cash Flow Data to Make a Loan Decision
4. Converting Income Statement Data into Operating Cash Flow Data
5. Managing Cash Flow
6. Cash Flow Numbers for Some Real Companies
The danger of free cash flow3m 56s
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