chap007CashFlowAnalysis(財務報表分析,臺灣中興大學)

7CHAPTERCashFlowAnalysisMcGraw-Hill/Irwin?2004TheMcGraw-HillCompanies,Inc.,AllRightsReserved.StatementofCashFlows

RelevanceofCashFlowsCashDefined

--referstocashandcashequivalents.Cashequivalents

areshort-term,highlyliquidinvestmentsthatare(1)readilyconvertibletoknownamountsofcash,and(2)nearmaturity(typicallywithin3months)withlimitedriskofpricechangesduetointerestrateshifts.StatementofCashFlows

RelevanceofCashFlowsCashisthebeginningandtheendofacompany’soperatingcycle.Netcashflowistheendmeasureofprofitability.Cashrepaysloans,replacesequipment, expandsfacilities,andpaysdividends.Analyzingcashinflowsandoutflowshelpsassessliquidity,solvency,andfinancialflexibility.Liquidity

isthenearnesstocashofassetsandliabilities.Solvency

istheabilitytopayliabilitieswhentheymature.Financialflexibility

istheabilitytoreacttoopportunitiesandadversities.StatementofCashFlows

RelevanceofCashFlowsStatementofcashflows(SCF)helpsaddressquestionssuchas:Howmuchcashisgeneratedfromorusedinoperations?Whatexpendituresaremadewithcashfromoperations?Howaredividendspaidwhenconfrontinganoperatingloss?Whatisthesourceofcashfordebtpayments?Whatisthesourceofcashforredeemingpreferredstock?Howistheincreaseininvestmentsfinanced?Whatisthesourceofcashfornewplantassets?Whyiscashlowerwhenincomeincreased?Whatistheuseofcashfromnewfinancing?StatementofCashFlows

CashFlowRelationsIllustration:Considertwoconsecutiveyears’balancesheetsdividedinto(1)cash,and(2)allotherbalancesheetaccounts:Accounts Year1 Year2Cashandcashequivalents

$3,000

$5,000Noncashaccounts:Noncashcurrentassets $(9,000)$(11,000)Noncurrentassets (6,000) (8,000)Currentliabilities 8,000 10,000Long-termliabilities 3,000 5,000Equityaccounts 7,000

9,000Netnoncashbalance $3,000 $5,000Note:ChangeincashfromYear1toYear2(increaseof$2,000)=Changeinnoncashbalancesheetaccounts($2,000increase)fromYear1toYear2Interrelationsbetweencashandnoncashbalancesheetaccountscanbegeneralized:Netchangesincashareexplainedbynetchangesinnoncashbalancesheetaccounts.Changeswithinoramongnoncashbalancesheetaccountsdonotaffectcash.Yet,thereisdisclosureofallsignificantfinancingandinvestingactivitiesinaseparatescheduleofnoncashinvestingandfinancingactivities.Changeswithinthecomponentsofcash

arenotreported.StatementofCashFlows

CashFlowRelationsStatementofCashFlows

ReportingbyActivitiesStatementofcashflowsreportsreceiptsandpaymentsbyoperating,financing,andinvestingactivitiesOperatingactivities

aretheearning?relatedactivitiesofacompany.Investingactivities

aremeansofacquiringanddisposingofnoncashassets.Financingactivities

aremeansofcontributing,withdrawing,andservicingfundstosupportbusinessactivities.StatementofCashFlows

NetCashFlowsfromOperationsIndirectMethod -Netincomeisadjustedfornon-cashincome(expense)itemsandaccrualstoyieldcashflowfromoperationsDirectMethod -Eachincomeitemisadjustedforitsrelatedaccruals*Bothmethodsyieldidenticalresults-onlythepresentationformatdiffers.StatementofCashFlowsIndirectMethodNetCashFlowsfromOperations

NetIncome+Depreciation+/-Gains(losses)onsalesofassets+/-Cashgenerated(used)bycurrentassets&liabilitiesNetcashflowsfromoperatingactivitiesStatementofCashFlows

DepreciationAdd-Back

Sales-Expenses-DepreciationandamortizationexpenseNetIncome+Depreciationexpense+/-Gains(losses)onsalesofassets+/-Cashgenerated(used)bycurrentassetsandliabilitiesNetcashflowsfromoperatingactivitiesAddBackStatementofCashFlows

Incomevs.CashFlowsExampleConsidera$100saleonaccountInperiodofsale,netincomeisincreasedby$100butnocashhasbeengenerated.

NetIncome 100 Depreciationandamortizationexpense 0 Gains(losses)onsaleofassets 0 Changeinaccountsreceivable (100) NetCashflowfromoperations 0Inperiodofcollectionnoincomeisrecorded.

NetIncome 0 Depreciationandamortizationexpense 0 Gains(losses)onsaleofassets 0 Changeinaccountsreceivable 100 NetCashflowfromoperations 100StatementofCashFlowsConstructingtheStatement

Increase DecreaseAssets (Outflow) InflowLiabilities Inflow (Outflow)StatementofCashFlowsConstructingtheStatementThecompanypurchasedatruckduringtheyearatacostof$30,000thatwasfinancedinfullbythemanufacturer.Atruckwithacostof$10,000andanetbookvalueof$2,000wassoldduringtheyearfor$7,000.Therewerenoothersalesofdepreciableassets.3. DividendspaidduringYear2are$51,000StatementofCashFlowsStepsinConstructingtheStatementStartwithNetIncomeAdjustNetIncomefornon-cashexpensesandgainsRecognizecashinflows(outflows)fromchangesincurrentassetsandliabilitiesSumtoyieldnetcashflowsfromoperationsChangesinlong-termassetsyieldnetcashflowsfrominvestingactivitiesChangesinlong-termliabilitiesandequityaccountsyieldnetcashflowsfromfinancingactivitiesSumcashflowsfromoperations,investing,andfinancingactivitiestoyieldnetchangeincash(8) AddnetchangeincashtothebeginningcashbalancetoyieldendingcashStatementofCashFlowsStepsinConstructingtheStatementNote:assetscosting$30,000werepurchasedduringYear2andwerefinancedinwholebythemanufacturer.StatementofCashFlowsSpecialTopicsEquityMethodInvestments–Underequitymethodaccounting,investorrecordsitsproportionateshareofinvesteecompanyprofits.Thepositionofreportedearningsinexcessofdividendsreceivedshouldbeeliminatedasitisnon-cashearnings.AcquisitionsofCompanieswithStock–Acquisitionsmadewithstockarenon-cash.Asaresult,changesinbalancesheetaccountsreflectingtheacquiredcompanywillnotequalcashinflows(outflows)reportedintheStatementofCashFlows.PostretirementBenefitCosts–TheexcessofnetpostretirementbenefitexpenseovercashbenefitspaidmustbeaddedtonetincomeincomputingnetcashflowsfromoperationsSecuritizationofAccountsReceivable–Reductionsinreceivablesasaresultofsecuritizationincreasesnetcashflowsfromoperations.Securitizationsareafinancingactivityandshouldbeinterpretedassuch.

DerivingOperatingCashFlowsfromIncomeforGould. Amount

Item (inthousands) ExplanationNetincome,accrualbasis $54 StartingpointofconversionAdd(deduct)adjustmenttocashbasis: Depreciation 35 Depreciationhasnocashoutflow. Gainonsaleofassets (5) Removegain(becauseitisonoperating)—cash

inflowiscashfrominvestingactivities. Increaseinreceivables (9) Cashflowfromsalesislessthanaccrualsales.

Decreaseininventories 6 Cashoutflowforinventoryexceedsaccrual inventorycostincludedincostofsales. Decreaseinprepaids 3 Cashoutflowoccurredwhenprepaidswere purchased-currentexpenseisnon-cash Decreaseinaccountspayable (5) Cashoutflowsforpurchases(includedincostof

goodssold)islessthanaccrualpurchasescost. Increaseinaccruedexpenses 4 Expensehasbeenrecognizedbutnocashpaid _____ yet.Cashflowsfromoperations(Exhibit7.3) $113CashFromOperations

IndirectMethodforCFOGouldCorporationCashFlowsfromOperations($thousands)

ForYearEndedDecember31,Year2Cashflowsfromoperatingactivities: Cashreceiptsfromcustomers[a]

$651,000 Cashpaidforinventories[b]

(360,000) Cashpaidgeneral,selling,andadministrativeexpenses[c] (176,000) ________ Netcashflowsfromoperations

$113,000Computations:[a] Salesof$660,000lessincreaseinaccountsreceivablesof$9,000.[b] Costofgoodssoldof$363,000

less

decreaseininventoriesof$6,000

plus

decreasein accountspayableof$5,000

[c] General,selling,andadministrativeexpensesof$218,000less(noncash)depreciation andamortizationof$35,000,lessdecreaseinprepaidexpensesof3,000,lessincrease inaccruedexpensesof4,000.CashFromOperations

ConvertingIndirecttoDirectCashFromOperations

ReportingFormatsforCFOCashFromOperations

InterpretingAccrualIncomeandOperatingCashFlowNetincomeplusmajornoncashexpenses

(typicallydepreciationandamortization)CashFromOperations

AlternativeCashFlowMeasureAssumetwocompanies(AandB)eachinvest$50,000inmachineryyielding$45,000peryearcashflowsbeforedepreciation.Assumingafive?yearusefullifeandnosalvagevalueforthemachinery,resultsfortheentirefive-yearperiodare:

Five-YearPeriodCashprovidedbyoperations($45,000x5years) $225,000Costofthemachine $(50,000)Incomefromoperatingmachine $175,000Averageyearlynetincome $35,000CashFromOperations

AlternativeCashFlowMeasure-Illustration

CompanyA: CompanyB:

Straight-Line Sum-of-the-Years’-

Depreciation DigitsDepreciation Income

before

Year Depreciation Depreciation NetIncome Depreciation NetIncome1 $45,000 $10,000 $35,000 $16,667 $28,3332 45,000 10,000 35,000 13,334 31,6663 45,000 10,000 35,000 10,000 35,0004 45,000 10,000 35,000 6,667 38,3335 45,000

10,000

35,000

3,332

41,668Total $225,000 $50,000 $175,000 $50,000 $175,000Incomebeforedepreciationforthesetwocompaniesisidentical--thisfaithfullyrevealsidenticalearningpower.Incomeafterdepreciationisconsiderablydifferentacrosstheyears—thisdoesnotreflectchangesinearningpower.CashFromOperations

AlternativeCashFlowMeasure-IllustrationWhilebothsuccessfulandunsuccessfulcompaniescanexperienceproblemswithcashflowsfromoperations,thereasonsaremarkedlydifferent.Wemustinterpretchangesinoperatingworkingcapitalitemsinlightofeconomiccircumstances.Inflationaryconditionsaddtothefinancialburdensofcompaniesandchallengesforanalysis.CashFromOperationsBusinessConditionsandCashFlows

CashflowsfromoperationsDeduct: Netcapitalexpendituresrequiredto maintainproductivecapacityDividendsonpreferredstockandcommonstock(assumingapayoutpolicy)Equals Freecashflow(FCF)CashFromOperationsFreeCashFlowPositivefreecashflowreflectstheamountavailableforbusinessactivitiesafterallowancesforfinancingandinvestingrequirementstomaintainproductivecapacityatcurrentlevels.Growthandfinancialflexibilitydependonadequatefreecashflow.Recognizethattheamountofcapitalexpenditures neededtomaintainproductivecapacityisgenerally notdisclosed—instead,mostusetotalcapital expenditures,whichisdisclosed,butcaninclude outlaysforexpansionofproductivecapacity.CashFromOperationsFreeCashFlowThestatementofcashflowsisusefulinidentifyingmisleadingorerroneousoperatingresultsorexpectations.CashFromOperationsCashFlowasValidatorsCashFlowAdequacyRatio–Measureofacompany’sabilitytogeneratesufficientcashfromoperationstocovercapitalexpenditures,investmentsininventories,andcashdividends:Three-yearsumofcashfromoperationsThree-yearsumofexpenditures,inventoryadditions,andcashdividendsCashReinvestmentRatio–Measureofthepercentageofinvestmentinassetsrepresentingoperatingcashretainedandreinvestedinthecompanyforbothreplacingassetsandgrowthinoperations:Operatingcashflow–DividendsGrossplant+Investment+Otherassets+WorkingcapitalCashFromOperationsSpecializedCashFlowRatiosFormAWorksheettoComputeCashFlowfromOperations(CFO)

DirectPresentation

For:_______________________

YearEnded______________

(inthousands) YearCashreceiptsfromoperations: Netsalesorrevenues(a) *1 $ $ $ Otherrevenueandincome (seealsolines22and25) *2 (I)Dincurrentreceivables 3 (I)Dinnoncurrentreceivables(b) 4 Otheradjustments(c) 5 TotalCashreceipts 6Cashdisbursementsforoperations: Totalexpenses(includeinterestandtaxes)(a) *7 Lessexpensesandlossesnotusingcash: –Depreciationandamortization 8 –Noncurrentdeferredincometaxes 9 –Other________ 10 –Other________ 11 –Other________ 12Changesincurrentoperatingassetsandliabilities: I(D)ininventories 13 I(D)inprepaidexpenses 14 (I)Dinaccountspayable 15 (I)Dintaxespayable 16 (I)Dinaccruals 17 IorDother________ 18 IorDother________ 19 IorDinnoncurrentaccounts(b) 20 TotalCashdisbursements(d) 21CashFlowAnalysisConvertingCFOtoDirectFormatFormA(Continued)WorksheettoComputeCashFlowfromOperations(CFO)

DirectPresentation

For:_______________________

YearEnded______________

(inthousands) YearDividendsreceived: Equityinincomeofunconsolidatedaffiliates *22 Lessundistributedequityinincomeofaffiliates 23

Dividendsfromunconsolidatedaffiliates 24 Othercashreceipts(