Join Jim Stice for an in-depth discussion in this video Operating cash flow data as an IPO reality check, part of Running a Profitable Business: Understanding Cash Flow.
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- Here are the income statement numbers…from scenario two entered into the matrix.…Now, are these cash flow numbers?…No. The income statement number is a measure…of economic performance,…which is not necessarily the same as cash flow.…But we know that we can use balance sheet numbers…to convert these income statement numbers…into cash flow numbers.…Here are the relevant balance sheet numbers…for the company in scenario two as of the end of last year,…and as of the end of this year.…Now, there's a little wrinkle here in scenario two.…This company is preparing to do an initial…public offering of shares early next year.…
As a result, the accountants have been quite careful…to make reported net income look as high as possible.…Let's review each adjustment necessary in the matrix.…First, depreciation. Remember that depreciation…was subtracted in the computation of net income,…but it does not involve any cash flow.…So, to adjust the numbers to be on a cash flow basis,…we need to add back the amount,…effectively removing depreciation from…
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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