Cash Flows from Investments and Financing

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來自 Indian School of Business 的課程

Accounting and Finance for IT professionals

67 個評分

Indian School of Business

Accounting and Finance for IT professionals

67 個評分

課程 3（共 6 門，Specialization Business Technology Management）

This course presents an introduction to the basics of financial accounting and finance for IT professionals. The first part of the course will focus on understanding the most important financial statements, namely, the balance sheet, the income statement, and the statement of cash flows. We will then focus on how we can understand the financial health and performance of the company by examining a number of important financial ratios that are derived from the financial statements of the company. The second part of the course will focus on the basics of finance. This includes the concept of time value of money, discounting cash flows, and capital budgeting. The course will also introduce the idea of real options, how they affect a project’s NPV, and their impact of the decision to accept/reject a project. Lectures on concepts will be supplemented with numerical examples.

從本節課中

Basics of Financial Statements

This module provides a brief introduction to financial statements and various common filings. These are the most important sources for obtaining information regarding a company's performance. Most strategies are indeed based on financial statements. After completing this module you will be able to get the important details from the balance sheets.

Introduction and Courser Overview2:31

Business Organizations4:57

Role of Financial Manager4:20

Introduction to Accounting5:08

The Balance Sheet3:12

Liabilities4:45

Shareholders' Equity4:30

Income Statement4:20

Statement of Cash Flows4:02

Cash Flows from Operations9:19

Cash Flows from Investments and Financing6:20

與講師見面

Ramabhadran Thirumalai
Assistant Professor
Indian School of Business

[MUSIC]

Last time, we saw what adjustments to do,

to determine a company's cash flows from operating activities.

We calculated Amazon's cash flows from operating activities

to be $11.92 billion in 2015.

In this video,

we will compute the cash flows from both investing as well as financing activities,

and then reconcile them with the change in cash on the balance sheet.

The next part of the statement of cash flows is the cash flows from investing

activities.

This part includes all ways in which a company invests its cash and

assets, both current as well as non-current.

These investments are not reported on the income statement, but

represent actual cash paid or received.

Like we saw for operations related current assets, any increase in investment

assets will mean that the company has spent cash to buy these assets and

will result in a reduction in cash.

Conversely, any sale of assets will result in an increase in cash.

In 2015, Amazon bought property and equipment worth $4.59 billion.

Which means that cash on hand reduced by this amount.

Amazon also made some acquisitions worth $0.80 billion,

which also reduced cash on hand.

Changes in investing-related current assets also need to be adjusted for.

The main item here is the purchase, maturity, and

sale of any marketable securities.

Any net purchases would mean cash was spent, and would be deducted.

Any net sales would mean cash was received, and would be added.

Amazon received a total of $3.03 billion in cash from the maturity and

sale of marketable securities.

On the other hand, it purchased $4.09 billion worth of marketable securities.

Summarizing all the cash flows related to investing activities,

we have a deduction of $4.59 billion in purchases of property and

equipment, a deduction of $0.80 billion for acquisitions during the year,

an addition of $3.03 billion from the sale and maturity of marketable securities,

and a deduction of $4.09 billion for the purchase of marketable securities.

These add up to a negative $6.45 billion.

Amazon's investing activities in 2015 resulted in

a reduction of $6.45 billion in cash.

The next part of the statement of cash flows

is the cash flows from financing activities.

These relate to the increase and decrease in non-current liabilities,

as well as financing-related current liabilities.

Similar to what we saw for adjustments for change in current liabilities,

any increase in financing activities would result in an increase in cash.

And any decrease in financing activities would result in a decrease in cash.

An increase in financing activities means that the company has raised additional

capital from various sources, and so it has more cash on hand.

Conversely, a decrease would mean that the company has paid back some of its

investors, which means that the amount of cash on hand decreases.

Under cash flow from operating activities, we had subtracted $0.12 billion

on account of excess tax benefits from stock based compensation,

stating that this was not an operations-related cash flow.

We add that amount back here as it is related to the company stock,

which is one of the channels of raising finance.

And this is a real cash saving for the company.

In 2015, Amazon raised an additional $0.35 billion in long-term debt,

but also repaid $1.65 billion worth of long-term debt.

It also repaid principal on capital and finance lease obligations worth

$2.46 billion and $0.12 billion respectively.

Since these are cash outflows, they are deducted.

None of these changes are reported on the income statement, which is why

we are making these adjustments to cash on the statement of cash flows.

Adding Amazon's different items on the cash flows from financing activities

gives us a negative $3.76 billion.

This means that Amazon used up a total

of $3.76 billion to repay some of its obligations.

Amazon's statement of cash flows also reports a foreign currency effect on cash

and cash equivalents of $0.37 billion, which is deducted.

Summarizing the cash flows from different activities, we have a positive $11.92

billion from operations, a negative $6.45 billion dollars from investing,

and a negative $3.76 billion from financing,

plus a foreign currency adjustment worth a negative $0.37 billion.

Adding these up, Amazon's change in cash and

cash equivalents during 2015 was $1.33 billion.

Amazon had cash and cash equivalence worth $14.56 billion at the beginning of 2015.

Adding the change in cash and cash equivalence of $1.33 billion

to this beginning of your balance gives us an end of 2015 cash and

cash equivalent balance of $15.89 billion.

Which is what is reported as cash and

cash equivalents in Amazon's 2015 balance sheet.

Hence using the statement of cash flows, we have reconciled the change in cash and

cash equivalents from the beginning to the end of 2015.

The statement of cash flows has given us a better idea as to where cash is

generated from and where cash is used.

In Amazon's case, its operating activities have generated cash,

while its investing and financing activities have consumed cash.

In the last few videos we have seen the different financial statements that

companies report publicly as well as their different companies.

But what do these financial statements tell us about the company's

financial health?

We can analyze a company's financial health by examining financial ratios

which are calculated using data from financial statement.

You will start looking at these next time.

[MUSIC]

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