Please enable JavaScript.
Coggle requires JavaScript to display documents.
Lecture 6: Financial Analysis (2) - Coggle Diagram
Lecture 6: Financial Analysis (2)
Cash flow analysis
IFRS
: require to include a statement of cash flows
Purpose of the cash flow statement
Evaluating an
entity’s financial structure
(including liquidity and solvency) and its
ability to meets its obligations
and to pay dividends
Understanding the reasons for the
difference between profit and loss
for a period and the net cash flow from
operating activities
Evaluating an entity’s
ability to generate cash
and cash equivalents, and the
timing
and
certainty
of their generation
Comparing
the
operating performance
of different entities
Enabling the
development of models
to assess and compare the
present value of the future cash flows
of different entities
Analyzing Cash Flow Information
Investing activities
How much cash did the company
invest
in growth/ assets?
Financing activities
What type of
external financing
does
the company rely on?
Did the company use
internally
generated funds
for investments?
Did the company use internally
generated funds to
pay dividends
?
Operating activities
How strong
is the firm’s internal cash
flow generation?
How well is
working capital
being
managed?
Free cash flows (FCF)
Difference between
cash flow from operations
and
cash investment in operations
It allows an analyst to assess a
company’s ability to pursue opportunities that enhance shareholder value
In relation to
Net Income
Constant depreciation and amortization on
increasing
income
Asset write- downs (
p.23
)
Receivable
: should analyze annual changes
Payable
Deferred revenue (
p.33
)
gain on sale of investment (
p.36
)
write- down of investment (
p.37
)
provisions for deferred income taxes (
p.38
)