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Overview

Cash is King! It’s possible for a company to have a nice net income yet not generate enough cash to stay in business. The Statement of Cash Flows was developed to deal with this problem and show users exactly: (1) how a company gets its cash, (2) how a company uses its cash, and (3) how much cash is on hand at the end of each accounting period. This statement is the third required component of a firm’s financial reporting. 

Many people do not know how to use this valuable financial statement or are even aware of its existence. In 1995 the American Institute of CPAs started requiring this financial statement (FASB 95) for financial reporting transparency and to deal with the problem of high net income accompanied by negative cash flow. This statement highlights the important difference between earnings and cash flow.

In some instances negative cash flow can be a good thing. For example, when a business is expanding, it might have negative cash flow for investment in new property, plant and equipment. A firm might also show negative cash flow because it is liquidating debt. But sometimes negative cash flow can be bad, especially if it results from regular business operations.

In addition to understanding the three major components of the Statement of Cash Flows it’s important to be able to use the newly created cash flow ratios. These ratios tell us the quality of reported net income, how a firm finances its expansion, if cash generated from operations is sufficient and many other critical items related to cash flow.

Why you should Attend

Brief Review of Balance Sheet and Income Statement Financial Analysis

  • Troubleshooting with Horizontal and Vertical Analysis
  • Financial Ratio Analysis

Understanding the Basic components of the Statement of Cash Flows – Cash Flows Components: 

  • Operations (CFO) 
    • How the Business Operating Cycle Impacts Cash Flow
    • Adjustments for Non-Cash Items on the Income Statement
  • Investing (CFI) 
  • Financing (CFF) 

Analyzing cash flow from/for: 

  • Operations (CFO) 
  • Investing (CFI) 
  • Financing (CFF) 
  • Year-to-year by percent in/out for a rapid analysis 

Calculate, understand and use the new cash flow ratios 

  • Liquidity - CFO/Average Current Liabilities 
  • Efficiency and Income 
    • CFO/Revenue 
    • CFO/Net Income 
    • CFO/Cash Outflow for Investments 
    • CFI Outflow/Total Outflow 
    • Cash in Fin./Cash in Operations 

Solvency 

  • CFO/Average Total Liabilities 
  • (CFO + Int. Paid)/Int. Paid 

Profit 

  • CFO per Share 
  • Stock Price 
  • Cash Flow Multiple 

FASB 95 on a Spreadsheet - Constructing an Excel Template 

Areas Covered in the Session

  • How to use the third required financial statement – The Statement of Cash Flows 
  • The three basic sections of the Statement of Cash Flows – The sections, the information contained, and what to look for 
  • How to Evaluate Cash Flow from Operations to Determine the Quality of Earnings 
  • Tricks That Make Tepid Earnings Look Great 
  • Why Slow Sales and Slow Collections Have a Major Impact on Cash 
  • How to Analyze Year-To-Year Cash Flow by Category 
  • How to Construct a Horizontal Analysis Cash Flow Template 
  • How to Analyze the Sources and Uses of Cash by Three Major Categories 
  • How to Construct a Vertical Analysis Cash Flow Template 
  • How to Use the Excel = IF Statement for Analysis 
  • Nine Cash Flow Metrics, What They Measure and What They Mean 
  • How to Link Excel Formulas from Different Worksheets 

Who Will Benefit

  • CFOs
  • Controllers
  • Treasurers
  • budgeting
  • finance and accounting staff
  • CPAs
  • VP
  • Directors and Managers of Finance
  • CEOs
  • General Managers 
  • Bankers
  • Business Owners

Speaker Profile

Joseph Weil has a Master of Accounting Degree from Florida State University and is an actively licensed Florida CPA. Joe’s work experience includes staff accountant with large CPA firm, corporate controller, state agency director of auditing and former municipal CFO. Joe also started and sold his own CPA firm. Joe is the owner and CEO of the National Center for Continuing Education, a nation-wide financial and technology training firm. Joe has led over 500 seminars and over 100 webinars.

Past in-house seminar/webinar clients have included Harley-Davidson, Hewlett-Packard, General Mills, Oracle, Burger King, Deloitte, Florida Power and Light and many similar organizations.