FRA : Reading 25. Understanding Cash Flow Statements

Reading 25. Understanding Cash Flow Statements

a. compare cash flows from operating, investing, and financing activities and classify cash flow items as relating to one of those three categories given a description of the items. (page 90)

 

1. CFO

- Interest, *dividends received

- Interest, Tax Paid

- trading securities 매매 손익

2. CFI

- fixed assests, debt, equity 투자

- loans

3. CFF

- stock, debt issuing

- *dividends paid

 

b. describe how non-cash investing and financing activities are reported.(page 91) 

Noncash investing and financing activities

- 자금조달해서 투자자산 매입하는 것처럼 현금없이 바로 전환이 이뤄지는 활동 (ex전환사채)

- must be disclosed

 

c. contrast cash flow statements prepared under International Financial Reporting Standards (IFRS) and US generally accepted accounting principles (US GAAP). (page 92)

 

US GAAP vs IFRS

	US GAAP	IFRS
Int rev	CFO	CFO or CFI
Int exp	CFO	CFO or CFF
Div rev	CFO	CFO or CFI
Div paid	CFF	CFF or CFO

IFRS가 판단이 더 많이 요구됨

 

d. distinguish between the direct and indirect methods of presenting cash from operating activities and describe arguments in favor of each method. (page 92)

CFO에서 직접법 간접법 구별 

Direct method

Cash collections from customers	429,980
Cash paid to suppliers	(265,866)
Cash paid for interest	(4,326)
...	...

- Cash base I/S와 유사함

- 더 많은 정보

Indirect method

Net income	18,788
Depreciation and amortization	7,996
Deferred income taxes	416
...	...
CFO	20,048

- Net income에서 시작해서 noncash expenses, nonoperating items 등 조정

- Net income과 CFO의 차이를 부각 (useful link)

 

Disclosure

- US GAAP의 경우 direct method를 쓰면, 결국 Indirect method와 같은정보를 추가로 공시해야함 (direct method를 장려하지만, 실제적으로 잘 안쓰이는 이유)

 

e. describe how the cash flow statement is linked to the income statement and the balance sheet. (page 94)

- Cash = NI + Bond + Equity - Asset

- 자본, 부채의 증가는 Cash의 증가, Asset의 증가는 Cash의 감소라고 생각

f. describe the steps in the preparation of direct and indirect cash flow statements, including how cash flows can be computed using income statement and balance sheet data. (page 97)

Direct method

- Cash collected from customers

- Cash used in the production of goods

- Cash paid for tax

- 위와 같이 현금을 어디에 사용했는지 상세히 적혀있으면 Direct, 그래서 더 많은 정보

 

Indirect method Step

CFO

1. Net income에서 시작

2. Add back all noncash charges (depreciation, amortization)

3. Operating과 관련 없는 손익 제거 (land 판매 수익, building 판매 수익)

4. Balance sheet 항목 변화 된 것 반영 (발생주의 회계로 인해 실제 I/S와 C/F의 차이를 B/S에서 조정하는 작업)

Cash = -자산변화량 + 부채변화량 + 자본 변화량 (단, Operating과 관련있는 것만)

 

p100 example 참고

 

g. convert cash flows from the indirect to direct method. (page 105)

CFO

1. Cash collection (Sales - dA/R)

- *Sales를 사용한다는 것 주의

- 고객으로부터 벌어들이는

- A/P는 supplier로부터

2. Operating과 관련된 Cash 항목 I/S와 B/S의 변화에서 가산

Cash collections	99,000
Cash to suppliers	(34,000)
Cash to wages	(8,500)
Cash to interest	(500)
Cash to taxes	(14,000)
CFO	42,000

 

h. analyze and interpret both reported and common-size cash flow statements. (page 108) 

- percentage of revenue (Sales)

 

i. calculate and interpret free cash flow to the firm, free cash flow to equity, and performance and coverage cash flow ratios. (page 110) 

FCFF = NI + NCC - WCinv - FCinv + int(1-t)

= CFO - FCinv + int(1-t)

NCC = noncash charges

WCinv= Working Capital investment (cash paid - received)

FCinv = Fixed Capital investment (cash paid - received)

- 기업의 주주, 채권자 등 이해관계자 모두가 사용할 수 있는 CF를 구하는데 목적

- 그래서 Int(1-t)를 가산해줌

 

FCFE = CFO - FCinv + net borrowing

net borrowing = cash received - paid

- 주주가 사용할 수 있는 CF를 구하는데 목적

- 채권 발행 등의 자금조달을 통한 CF도 사용할 수 있기 때문에 net borrowing을 가산해줌

 

C/F ratio

Performance ratios

-분자는 모두 CFO 사용

1. cash flow-to-revenue = CFO / revenue

2. cash return-on-asset = CFO / avg total asset

3. cash return-on-equity = CFO / avg total equity

4. cash-to-income ratio = CFO / operating income

5. Cash flow per share = CFO - preferred div / weighted avg shares

 

Coverage Ratios

1. debt coverage = CFO / debt

2. interest coverage = CFO + interest paid + tax paid / interest

3. reinvestment ratio = CFO / long-term assets paid

4. debt payment ratio = CFO / long-term debt paid

5. dividend payment ratio = CFO / dividends paid

6. investing and financing ratio = CFO / cash outflow form CFI, CFF