1-26
FINANCIAL STATEMENT ANALYSIS
As you can see, the Cash Flow Statement is divided into
O
PERATING
A
CTIVITIES
, Sources
and
Uses
, and
F
INANCING
A
CTIVITIES
. The final
calculation is the
N
ET
I
NCREASE
or
D
ECREASE IN
C
ASH AND
M
ARKETABLE
S
ECURITIES
.
Let's see how we get there.
Operating
activities:
Sources
N
ET INCOME BEFORE PREFERRED DIVIDENDS
($9.9 million) and the
$8.9 million
D
EPRECIATION
charge are taken directly from the 1993
Income Statement.
The current liabilities from the Balance Sheet are listed individually
(I
NCREASE IN
A
CCOUNTS
P
AYABLE
, I
NCREASE IN
A
CCRUED
W
AGES AND
T
AXES
,
I
NCREASE IN
O
THER
C
URRENT
L
IABILITIES
)
with their net change from 1992
to 1993.
T
OTAL
S
OURCES FROM
O
PERATIONS
(
$20.8 million
)
is the sum of
these sources.
Operating
activities:
Uses
Next, the net change in each asset account except
C
ASH
and
M
ARKETABLE
S
ECURITIES
is listed:
I
NCREASE IN
A
CCOUNTS
R
ECEIVABLE
, I
NCREASE IN
I
NVENTORIES
, I
NCREASE IN
P
REPAID
E
XPENSES
, I
NCREASE IN
O
THER
C
URRENT
A
SSETS
, I
NCREASE IN
G
ROSS
F
IXED
A
SSETS
. G
ROSS
F
IXED
A
SSETS
is used
instead of
N
ET
F
IXED
A
SSETS
because we have already adjusted for
D
EPRECIATION
and we do not want to double count.
T
OTAL
U
SES FROM
O
PERATIONS
is the sum of these changes.
Financing
activities
Finally, we summarize the financing activities by listing each net change
from 1992 to 1993 for the potential sources of capital:
I
NCREASE IN
N
OTES
P
AYABLE
, I
NCREASE IN
L
ONG
-
TERM
B
ONDS
, I
NCREASE IN
P
REFERRED
S
TOCK
, I
NCREASE OF
C
OMMON
S
TOCK
. N
ET
F
UNDS FROM
F
INANCING
is the sum of the financing activities.
Total funds from
operations and
financing
T
OTAL
F
UNDS FROM
O
PERATIONS AND
F
INANCING
is calculated by
subtracting the uses from the sources and adding to that number the
N
ET
F
UNDS FROM
F
INANCING
. In our XYZ example, that calculation is:
Total operating sources
$20.8 million
-
Total operating uses
18.9 million
+ Net financing sources
6.7 million
____________________________________________________________
Total funds from operations and financing
$ 8.6 million