Join Jim Stice for an in-depth discussion in this video Managing operating cash flow, part of Running a Profitable Business: Understanding Cash Flow.
- For a company that sells a product,…the company's Operating Cycle is…the amount of time that elapses…from when the company buys the inventory…until when the company collects the cash…from selling that inventory.…The length of the Operating Cycle…is the sum of the length of two very different processes.…First, how long from when a company buys the inventory…until it sells or uses that inventory.…Second, how long from when a company…makes a sale until the company…collects the cash from that sale.…Let's talk about that first length of time,…which is often called the number…of days' sales in inventory.…
Let me illustrate with an example.…Nike makes athletic shoes and other sportswear.…Nike manufacturers these items…and then sells them to retail outlets, typically on credit.…In terms of the length of Nike's Operating Cycle,…we must first consider how many days elapse…from the time that Nike buys raw materials…until the time that Nike sells the finished shoes…and sportswear to retail outlets.…Using data from Nike's financial reports,…
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.
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- 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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