The second component is cash flows from investing activities.
Here we will see how much cash is spent or generated,
company's investment activities and
most of the time when I say investment, you should think about fixed assets.
And finally, the third component is cash flow from financing activities.
Here we will have an idea about company's cash generation or
cash spending on financing activities.
By financing I'm talking about equity issuance, dividends, and bank loans.
Here is an example of a cash flow statement from Walmart at the end of year
2015.
And let's first concentrate on the last box.
The first number on the last box is net increase in cash and
cash equivalents of 1,854.
This is the amount of cash generation, net cash generation, in year 2015.
The second number is cash and
cash equivalents at the beginning of the year and that amount is 7,281.
So we know beginning amount of cash, we know the amount of cash change within
the year 2015 and if we sum them up we are going to find the last number on this box,
which is cash and cash equivalents at the end of the year of 9,135.
In other words, cash flow statement explains to you in detail how
cash of Walmart changed between year 2014 and 2015.
And this amount of cash change is 1,854.
So the question here is, where is this cash exchange coming from?
The first and
the most important section of cash flow statement is, cash flow from operations.
And that is the first box in the slide.
How much is the cash flow from operations for Walmart?
It is 28,564.
That's a huge positive number.
So Walmart generates this much of cash from its core operations,
which is buying and selling groceries.
Secondly, we have cash flows used in investing activities of
negative because the number is in parentheses, 11,125.
This is the total amount of cash used in investing activities.
And thirdly, we have cash used in financing activities of again
minus because it is again in parentheses, 15,071.
So basically cash flow from operations,
cash flow from investing activities and cash flow from financing activities
will give you net cash change in the year 2015 of 1,854.
Now, we are going to spend some more time on preparation of cash flow statements.