27. How to read a cash flow statement

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In this lesson, we evaluated the cash flow statement of Walmart, Sears, Intel, and Kodak. The lesson provides good and bad cash flow statements so students could see the difference between risky and healthy companies. One of the key factors learned in this lesson was the importance of the operating activity and the operating activities section of the statement. Since the investing and financing activity are dependent upon the operating activity, it became obvious this section is the lifeblood of any business.

[@alexlee2995]

sears bankrupted now. lol. you saw it coming.

[@rafaelbarbosa9833]

6 years later Sears goes out of business

[@ericgilmore5949]

And Kodak hit $60 a share

[@GjergjCamaj]

Preston, 26 and 27 are out of order on the playlist. Great work btw. I haven't found anyone better.

[@sycosindrum]

its crazy because looking back now; companies like Sears should've been easy to spot after reading the cash flow.

[@PGIFilms]

A lot of investors mistakenly concentrate heavily on the company's Profits & Loss Statements to determine if the company is "successful" but the Cash Flow Statements give a better picture of what the company really has on hand and what it is doing with its money. There is an excellent video by MoneyWeek that shows an example of how different a company can look between what the bottom line of their P&L statement looks like and the bottom line of their CF statement looks like. In the example comparison the company looks like it's making 69 million on the P&L statement, but they have a NEGATIVE 10 million in cash flow on the the CF statement. Both figures are accurate and true for the company, but they evaluate 2 different aspects of how a company can be evaluated. the video is titled "What is a Cash Flow statement?" and the link is here: kzbin.info/www/bejne/fZyqlZ-djZirj6s

[@TacoEqualsFtw]

7:53 "Investing in inventory" does not appear in the financing section of the CFS. Fluctuations in ending inventory are included in the Changes in Working Capital line in the Operating Section of the CFS. Clearly the negative investing cash flows are a result of PP&E expenditures.

[@Widdget]

Really great videos so far Preston! Loving all the info. Just FYI- number #27 (this one) is out of order on the intermediate playlist. It comes after 25 but before 26!

[@johnnyt9405]

Thanks for pointing that out! I'm glad I read through the comments, it helped me out cause I was confused, I was like, "wait, there's something missing..."

[@semiemregocer]

Hello, Msn doesn’t seem to be showing 10 year summary anymore. Is that correct?

[@rtmarsh614]

The Cash Flow Statement is the best document to determine if you have "Vigilant Leaders." What I mean is this document tells you how management is using the money from Operating Activities, or what they are doing in the absence thereof. Once I get past my criteria for P/E and Price/Book, this is the first place I will look to determine if management is good, or if they suck. That is a quick discriminator for me, and it tells me if a seemingly bad company is on a path to redemption with better management practices.

[@Giovanni-to4xh]

wish msn money was still there today with the same layout, it used to be so clear now its a whole mess :(

[@a.kartikeyanaarayanan2904]

Very well explained. Probably the best video I have seen on this topic.

[@bgpeters]

Another great video Preston, just wondering if it cut short? Cheers,

[@phillipkaye6792]

Hi Preston. Great videos although it seems i’m a little late to this party. Do you have any videos using msn money as it now exists as it looks their website layout has very much changed since these courses were published. Thank you in advance.

[@vineetbansal9850]

Your videos helped me begin my investing career in the stock markets.

[@Value_Pilgrim]

Hi Preston, I am learning a lot while watching through your videos and can't thank you enough. The video previous to this(Lesson 26 / Video 15 in the playlist) appears to be deleted. Could you re-up it pls. or let us know what we are missing. Thanks in Advance.

[@kingdomovies]

IS cash from operating activities similar to free cash flow? yahoo finance doesn't show cash flow from operating activities but has a free cash flow section

[@brendansmith670]

What is the line "financing Cash flow items? -- why is it positive in one case when its dependents are negative? Thank you.

[@D_Knowledge-b5l]

My coment was is 100 th one lol and iam watching this in 2020

[@potnudles]

that evil laugh before pulling up the kodak staement lolol @ 10:17

[@hl3641]

Thx for making viewers less stupid :) . Good job

[@ossenaar]

Excellent education! One small observation. The Sears Holding Company example in the video shows updated, restarted and reclassified statements, all for the month of March 2012 so we can not conclude a multi year analysis/trend.

[@l4k]

Yes, he didn't realize it.

[@angeljohn1250]

Preston one day when i get decently well off from stocks.. i will make a sizable donation to your company Inshallah(if god wills). Man you did a great work with these videos.

[@ultragoyim1270]

angel john thank you. I will too..good to see i theres two of us here

[@waeeeezeeeee]

really? -_-

[@SmartsidSidhu]

1000000k likes....wonderful lessons ...

[@agustincarrasco5372]

So what number would you look at to calculate Cash Flow per share? (Besides the Denominator being Average Shares Outstanding).

[@36boys.]

how can I find the Net Borrowing amount?

[@tammaderalshammari6149]

Hello from 2020 Kodak is doing great

[@neko3583]

Ola..Morningstar site does not show negative numbers in red color or with the - sign. Numbers between parentheses means Negative?? Thank you!!

[@randomguy31]

yes, parenthesis means it's a negative number

[@neko3583]

Big help!!Thank you from Japan.

[@shishirsuman4388]

Preston: In INTC income statement in the video, one data point suggested large buy-back of shares by the company. However, same year, the statement suggested large issuance of bond. Is this an indication of debt being cheaper source of capital at that moment (while maintaining other things like balancing debt and equity proportions).

[@Erez.Levi.Stocks]

first i will say thanks for the video i just now exposed. second i have a question: in minute 11:00 you say kodak sell assets..where i can find this info? thanks in advance

[@zakharenkoff]

2017... WMT is up about 50% (if dividends are invested - compound interest) SHLD is down 87%, no dividends were paid.

[@icesummer1725]

where are the expenses in the operations going to ?

[@sivakumaranbazhagan1672]

thanks for the knowledge sharing

[@robertocanales1201]

Thank you very much! 😑🙏🏼

[@vishalrajan2343]

Back when WMT stock was 68 bucks, thanks for the great vid still helps today!

[@HusseinKorish]

msn money link please .... as seen in the video

[@ednakazuya12]

Perfect video

[@southpawslugger8819]

What website is he using for this data

[@jona457]

Thank you for this. I'm getting more and more comfortable with the subject of Cash Flow.

[@texasaggie85]

Ahh... the playlist is out of order 🙄... i was so confused

[@alexshay7969]

Thank you, Preston. I had a chance to watch the Owner's Earnings video. So would you say that Net Cash (Ending Balance) is that Free Cash Flow?

[@jasonjohnson8886]

Does this video get cut off?

[@AnkushSharma-zv5hv]

thank you so much for everything you are doing for the investor community

[@alexshay7969]

This is a great lesson. Cash flow statement has been such a mystery to me, but now all this makes great sense. Do you have a lesson on Free Cash Flow?

[@gunalansanthi7080]

Should we need to look the technical analysis of a stock for long-term is it necessary

[@duyenvu4619]

All your lectures are awesomeeeeee!!!!!!!!!!!!!! Thanks so much for making them for us!!!!!!!!!!!!!!!!

[@DJahop]

What, no goodbye?

[@kristinagraciavega7731]

im now gonna start watching this on and on.. now on my lesson 2.. thanks :)

[@bbmak0]

if I see a positive # under net borrowing in financing activities, is that mean the company is borrowing money?

[@concreteboard5098]

you my friend are a god

[@Gurjars007]

Thanks you sir 😘

[@neur0syphilis]

thank you man! please tell me how can I interpret "Issuance(Retirement) of Debt"

[@rektl2036]

MSN money.. wow..

[@tinnguyen2219]

Thank you so much for this useful data! Greatly appreciated .

[@thinhpham4713]

This, is a damn good video. YES, IT IS.

[@KaushikChoudhury]

Thanks again ... explained in very lucid way for people to understand

[@youcan5863]

Thank you 🙏

[@rethabilemofokeng1698]

Thank you very much aubuti 👍🏻

[@johnfisher4910]

Fantastic tutorial! Thanks so much.

[@pkrkrish]

Great video

[@pratikphunguskar]

Great work i was waiting for this module thanks a lot........

[@kaylareid4632]

where do i find information about when a company pays out dividends ? eg quartley ,semiannually or yearly

[@PGIFilms]

Check the investors section of the company's website (if it is publicly traded) and look for its quarterly/annual financial statements and/or its annual SEC 10-K report. The timing and amount of stock dividend payouts are typically detailed in the statement notes where the company explains their plans for the upcoming year/quarter. You can also obtain a company's annual 10-K report from the Federal SEC website.

[@chrisbaker2669]

Sears was an amazing short stock since 2012.

[@K603K]

you are doing some amazing work,keep it up!

[@paratrip]

Your efforts are greatly appreciated

[@hier0phant336]

Thank you, very instructional

[@Trumpeter2345]

Very helpful, thank you.

[@marketsanalyzers]

U r king

[@DyJKevin]

very helpful. thank you for the lesson

[@pedromanueldasilva249]

A

[@danasahwan1116]

Hi Preston ! Is it possible that a company has negative operating, investing and financing net cash ? If yes, what does it mean ? Thanks in advance !

[@ornocrigret2508]

If they have negative operating it means they are loosing money

[@terrygraves8316]

Can't wait for the next video!!!

[@josephchapewa434]

very helpful. thank you

[@sevjon41]

Hi preston what does it mean if financing activities are positive. And is it bad if they are consistently positive?

[@ornocrigret2508]

Maybe yhey are acquiring debt. It is bad, I think, if debt ratios are over 50, if they are over 100% it is too much risk, maybe in both cases they have liquid ratios below 1

[@dylantegtmeier114]

Great work! Awesome knowledge! Thanks for sharing!!

[@HudsonArmstrong]

Thank you very much for this well thought out video.

[@saikatchowdhury3536]

Hello Mr. Preston, loved ur lessons. I would like to know about “How to read Income Statements and Balance Sheets” when u will upload a video on that?? kindly let me know.. Thank you...

[@saikatchowdhury3536]

Could u plz help me on this!!

[@sherynsamson]

Check the course 1.

[@wwbaseball94]

are you a trader or an invester for income?

[@arek4518]

This was incredible help

[@utkarshbhatnagar9333]

Hello, is it a good sign if a company is earning from its investing activities ?

[@sherynsamson]

Yes, more investments, more extra cash. As long as its a good,stable investment.

[@michaelvu8776]

Thank you for the lesson

[@raphaeldasilva3269]

How many years of cash flow statements do we Have To watch for To have a trend ?

[@Imdazedandconfuzed]

More than one.

[@TopJoo7]

You sir are a saint.

[@ABHILASHABARAK1]

So, Is net change in cash the profit, if positive?

[@sherynsamson]

Not really. The perception is quite wrong here. The operating income is the the 'actual profit' from which they spend all these. The net change is just the extra cash from the profits they make, which they haven't used for investing or paying back the debts, or anything at all. Its just the profit they've left untouched.

[@adamolesiak6528]

you said that if a company buys back it's shares, it's a good thing for the shareholders, because their shares are more valuable. Is that right? I thought that a company can simply release let's say 20% of their bussiness as shares. If they buy back 10%, they will own 90%, but it should have absolutely no affect on value of the remaining shares. If it is not correct, any company could just release millions of shares making your shares worthless due to inflation and make itself the owner of 99.99% of the business for free.

[@potnudles]

a company like coca cola reducing the number of shares would increase the damand for the shares, and would increase the market cap. for example: frist 10 customers get 80% discount, youre going to get a bigger crowd trying to get a cheap whatever.

[@sherynsamson]

Lets have a generic example: [Before the company buying back the shares] Lets say the market cap of a company is 30 USD And they have 10 shareholders. The value of each share is 30/10 --> 3 USD Lets say they bought back two shares. Value of each share now becomes --> 30/8 ~~ 3.75 USD > 3 USD. Throw in more variables like the Cost of buying back the shares, The end value of share would be lesser. But at large scale, the end value would anyways be greater than the value before buying back the shares.

[@robertruschak7083]

When a company buys back it's common stock, it reduces the outstanding shares and temporarily boosts (EPS) earnings per share. Private Equity companies operate differently ! Reinvest the earnings into more real estate deals/ capital expenditures!

[@adrianreid1646]

wen they buy back the shares the demand goes up , with less shares in circulation with high demand and low supply forces the the value up

[@sajidsha8298]

tHANKS a lOT......

[@wadehsu4300]

is there a lesson 26?

[@danielcharles8898]

great video

[@TimCooley]

This is amazing! Thanks for this.

[@xlingdai100]

very good ~

[@alexshay7969]

Awesome. Thank you!!

[@sleepersix]

more detail!

[@TheKOng2000]

Any book you recommend?

[@cameronmilne3590]

TheKOng2000 I'd recommend "the intelligent investor" by Benjamin Graham to get you started. Then once you've read that get your teeth into "Financial Shenanigans" by Howard M Schilit and Jeremy Perler.