Join Jim Stice for an in-depth discussion in this video The recent financial history of General Motors summarized in free cash flow, part of Running a Profitable Business: Understanding Cash Flow.
- We can learn a lot about the ups and downs…of General Motors over the past 15 years…by looking at the company's free cash flow.…Here are General Motors' free cash flow numbers…for the years 1999 through 2001.…Now look at the cash flow numbers from 1999 through 2001.…We have operating cash flow reported here.…Is it the direct or the indirect method?…Well, it's the indirect.…How can we tell?…Because the presentation starts with net income.…If we're using the direct method,…the first number is cash collected from customers.…Now to simplify this presentation,…all of the cash flow implications of the changes…in the balance sheet operating items--…the accounts receivable, the inventory,…the accounts payable, the prepaid expenses,…the wages payable--all those things…have been lumped together into one number.…
Now to test your intuition,…think of this one number as impact from change in inventory.…So question--…in 2001, did inventory increase or did it decrease?…Well, the answer is that inventory increased in 2001,…which means a reduction in operating cash flow.…
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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