Learn the difference between cash flow projections and pro forma statements. Examine what would be a better choice than another to use during forecasting. Learn how to calculate free cash flow.
- How are cash flows different than pro forma statements?…Well, net income from the pro forma statement…provides information on profit earned…during the period,…rather than the cash that's generated.…If a business sells a product to a customer,…it recognizes the revenue…and the good is transferred even if the payment…won't be received until 30 days later.…Cash flow on the other hand,…provides an indication of how much actual cash is generated,…and hence available to be paid out…to investors in the business,…or to invest in new projects.…
So, free cash flow projections are generally thought of…as a bit more solid than pro forma statements.…So what exactly does free cash flow indicate?…Well, if it's growing, then that means…that there are going to be increased earnings.…Investors will be rewarded more quickly.…Conversely, insufficient free cash flows…for earnings growth,…can quickly increase the amount of liabilities.…Paired with low liquid,…this can amount to disaster for the business.…However, keep in mind,…just like with pro forma statements…
- Explain the four different types of financial statements.
- Distinguish between the types of moving averages.
- Determine a seasonal adjusted trend.
- Break down pro-forma financial statements.
- Identify cash flows, and what increased liabilities and decreased earnings generally indicate.
- Tell what a regression is.
- Outline the naive approach.
Skill Level Intermediate
Finance Foundations: Business Valuationwith Jim Stice1h 39m Intermediate
1. Finance Basics
2. Simple Financial Forecasting
3. Pro Forma Financial Statements
4. Projecting Cash Flows
5. Introduction to Regression Analysis
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