Join Jim Stice for an in-depth discussion in this video The Home Depot story revisited, part of Running a Profitable Business: Understanding Cash Flow.
- When last we spoke about Home Depot, back in 1985,…cash flow problems had pushed the company to the wall.…- In fact, with a cash burn rate…of three million dollars per week,…and with just nine million dollars cash in the bank,…Home Depot had just three weeks to figure out…how to either get some additional external financing,…or reduce, dramatically, its cash burn rate.…- So, what did they do?…- Well, a combination of factors really.…Much of what they did was focused…on improving their operating cash flow.…- First and foremost,…they launched an inventory management system…that allowed them to track their inventory more carefully.…
With more careful inventory management,…they didn't need as much inventory lying around,…idle in their warehouse stores.…- Less inventory lying around…means fewer inventory purchases,…and that means less cash flowing out to suppliers…to pay for inventory…that is just going to be sitting around on shelves.…- In 1985, Home Depot spent 69 million dollars…to buy extra inventory.…That contributed to their 1985 cash flow problems.…
Jim Stice
Earl Kay Stice
Released
9/16/2015Want to hear more from Jim and Kay? Learn about all three types of accounting—financial, managerial, and income tax—in their Accounting Fundamentals course.
This course qualifies for 1.75 Category A professional development units (PDUs) through Lynda.com, PMI Registered Education Provider #4101.
The PMI Registered Education Provider logo is a registered mark of the Project Management Institute, Inc.
- 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 Appropriate for all
Duration
Views
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Introduction
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Welcome1m 45s
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1. The Importance of Cash Flow Analysis
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2. Overview of the Statement of Cash Flows
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3. Using Cash Flow Data to Make a Loan Decision
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Company A: Help!4m 13s
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Company B: Strange2m 4s
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Company C: Normal2m 38s
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Company D: Cash cow2m 30s
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4. Converting Income Statement Data into Operating Cash Flow Data
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5. Managing Cash Flow
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Managing operating cash flow5m 24s
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Managing investing cash flow4m 59s
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Managing financing cash flow3m 55s
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6. Cash Flow Numbers for Some Real Companies
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The danger of free cash flow3m 56s
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Conclusion
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Wrap-up2m 36s
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Video: The Home Depot story revisited