FinancialStatementAnalysisKRSubramanyamJohnJWild07CHAPTERCashFlowAnalysis2ALookAtThisChapter•Inthischapterweanalyzecashflowmeasuresforinsightsintoallbusinessactivities,withspecialemphasisonoperations.Attentionisdirectedatcompanyandbusinessconditionswheninterpretingcashflows.Wealsoconsideralternativemeasuresofcashflows.3AnalysisObjectives•Explaintherelevanceofcashflowsinanalyzingbusinessactivities•Describethereportingofcashflowsbybusinessactivities•Interpretcashflowsfromoperatingactivities•Analyzecashflowsunderalternativecompanyandbusinessconditions•Describealternativemeasuresofcashflowsandtheirusefulness4StatementofCashFlows•Cashisthemostliquidofassets.–Offersbothliquidityandflexibility.–Boththebeginningandtheendofacompany’soperatingcycle.•Contrast:AccrualaccountingandCashbasisaccounting•Financialstatementsanalysisrecognizesthataccrualaccounting,wherecompaniesrecognizerevenuewhenearnedandexpenseswhenincurred,differsfromcashbasisaccounting.RelevanceofCash5StatementofCashFlows–Netcashflowistheendmeasureofprofitability.Itiscash,notincome,thatultimatelyrepaysloans,replaceequipment,expandsfacilities,andpaysdividends.–Accordingly,analyzingacompany’scashinflowsandoutflows,andtheiroperating,financing,orinvestingsources,isoneofthemostimportantinvestigativeexercises.–Cashflowanalysishelpsinassessingliquidity,solvency,andfinancialflexibility.RelevanceofCash6StatementofCashFlows•Liquidity(流动性)isthenearnesstocashofassetsandliabilities•Solvency〔偿债能力〕istheabilitytopayliabilitieswhentheymature.•Financialflexibility(财务灵活性)istheabilitytoreactandadjusttoopportunitiesandadversities.7StatementofCashFlows•Statementofcashflows(SCF)helpsaddressquestionssuchas:aHowmuchcashisgeneratedfromorusedinoperations?aWhatexpendituresaremadewithcashfromoperations?aHowaredividendspaidwhenconfrontinganoperatingloss?aWhatisthesourceofcashfordebtpayments?aHowistheincreaseininvestmentsfinanced?aWhatisthesourceofcashfornewplantassets?aWhyiscashlowerwhenincomeincreased?aWh...