Cash from operating activities

[@TheFinanceStoryteller]

Enjoyed this video? Then subscribe to the channel now, and watch my video on the cash from investing activities section of the cash flow statement next: kzbin.info/www/bejne/gYe3koGVdpefitE

[@pulakkabir2276]

is notes payable operating activities or financing activities?

[@tinashesimbini5800]

Thank you, Thank you ,Thank you !! The concept of "Profit View" and " Cash View" has enlightened me finally

[@TheFinanceStoryteller]

Glad it was helpful, Tinashe! I am summarizing some of the main differences between them in this 2 minute video: kzbin.info/www/bejne/iYmZpXevbL6DncU

[@mumanifranklin]

Thank you so much! Incredible work explaining each component of this section of the cashflow

[@TheFinanceStoryteller]

Glad you enjoyed it! The cash flow statement gives a lot of good information about a company. Here are some more examples and case studies: kzbin.info/www/bejne/o4ulm6Z_jtd_rK8

[@davidroldan6007]

As always, clear and easy to understand

[@TheFinanceStoryteller]

Glad it was helpful, David! 🙂

[@ankitdixit3674]

ThankYou from India 🇮🇳 🕉👍👍👍

[@TheFinanceStoryteller]

Greetings back from the Netherlands! 🇳🇱

[@DeepDataInvesting]

Beautifully done! Always looking forward to your videos. One of the best in the community! 🙂👍

[@TheFinanceStoryteller]

Thank you so much 😀

[@DeepDataInvesting]

@@TheFinanceStoryteller No, thank you! Have a great day! 🌞

[@TheFinanceStoryteller]

You too, my friend!

[@konstancyja82]

Agree!

[@rehan-hq2ec]

Wonderful Explanation! Easy to understand with practical examples!

[@TheFinanceStoryteller]

Very happy to hear that, Muhammad! I am covering the related topics "Cash from investing activities" and "Cash from financing activities" as well in separate videos: kzbin.info/www/bejne/gYe3koGVdpefitE

[@rehan-hq2ec]

Thank You! I have been binge watching your channel since i found it! I am an ACCA student becoming an Accountant. 😃

[@TheFinanceStoryteller]

@@rehan-hq2ec Great to hear that! Please tell your fellow students about the channel as well. And let me know if any topics are missing that you think I should make videos about.

[@user-ql3ws5uz1d]

Great video! Cash flow statements and income statements can be very confusing, especially for starters. One potential issue/discussion I have with the CF statement is that while items like D&A and share-based expense are indeed non-cash items, but they are also part of the actual expense; they are just "invisible" costs, i.e. a company buys a factory and records the whole CAPEX in the CF statement, but in the income statement it is expensed usually on a straight-line basis, which makes the earnings look higher and more normal. But for the share-based expense, while there's no cash cost (hence the add-back), but the total earnings that belong to the original shareholder are actually diluted because of the dilution. I guess we have to reconcile both statements to get a deeper understanding of a company's financials.

[@TheFinanceStoryteller]

Very good points! My approach is to not just follow "one number" for a company, but to track various ones over the years (revenue, operating margin, free cash flow, to start with). On top of that, I want to figure out what is the mechanism that drives these metrics. In other words: "peel the onion", and don't get fooled by top level appearances or smokescreens. For example, if you track EPS (Earnings Per Share), then how much of year-over-year growth in EPS is driven by the numerator (earnings) versus the denominator (number of shares, heavily influenced in some companies by share buybacks). Not sure whether you have watched these yet, but my video on analyzing EPS kzbin.info/www/bejne/ioO8kKCgnMyAh7s and in terms of the bigger picture my video on financial analysis kzbin.info/www/bejne/oHiQoIuuapmkrqc might be helpful here. It's a long journey to try to understand enough of a company's financials to be able to decide whether you would invest in it or not! But fun as well, if you enjoy analytics like I do. ;-)

[@user-ql3ws5uz1d]

@@TheFinanceStoryteller thank you and I'll check those videos out!

[@tarekalsherif57]

Thank you so much for the awesome explanation!

[@TheFinanceStoryteller]

You're welcome, Tarek! It's part of a series on cash flow.... I also cover cash from investing activities, and cash from financing activities: kzbin.info/www/bejne/gYe3koGVdpefitE

[@konstancyja82]

Beautiful explanation, as always! Congratulations

[@TheFinanceStoryteller]

Grazie 1000! Thank you for your support. 😘

[@LucasL1991]

I'm learning a lot with you! Thank you so much!!!

[@TheFinanceStoryteller]

You're welcome! Happy to help. 🙂

[@TheFinanceStoryteller]

I have made videos about the related sections of cash from investing activities kzbin.info/www/bejne/gYe3koGVdpefitE and cash from financing activities kzbin.info/www/bejne/rqiZaHl_mrumoJo as well. If you watch those, you'll have the full picture of the cash flow statement!

[@kushangupta2016]

I am from India u are from which country??😊😊

[@robertkamyeboah]

This very helpful .Thanks

[@TheFinanceStoryteller]

Glad to hear that, Robert! Here's the link to my playlist with cash flow statement videos, there are some more cash studies in there that help bring the topic to life: kzbin.info/www/bejne/o4ulm6Z_jtd_rK8&pp=gAQBiAQB It also includes videos on the other two sections: Cash From Investing Activities and Cash From Financing Activities.

[@lapu1602]

Does accrued expenses go in the cash flow from operating activities?

[@TheFinanceStoryteller]

Hi! I think your question should be rephrased to "Does the year-over-year change in accrued expenses go in the cash flow from operating activities?", in order to align it with the changes in operating assets and liabilities shown in the video (change in accounts receivable, change in inventories, etc.). For accrued expenses, I think the answer should be no, as accruals by their very nature are a non-cash event.

[@lapu1602]

@@TheFinanceStoryteller yes you’re absolutely correct. Thank you the response. Great content btw.

[@TheFinanceStoryteller]

Happy to help! Eager to get 200,000 subscribers, possibly by the end of this year!!! Please spread the word to friends and colleagues.

[@whateverwtevr1090]

Hi! I have task where I need to analyse the cash flow statement, operating activities specifically and give comments about it. What should I look at or focus on the operating activities part if I want to analyze the data? p/s: the company is using the indirect method

[@TheFinanceStoryteller]

My favorite things to look at are: 1) Big picture: is CFOA higher or lower than Net Income? In a lot of cases, it is higher due to adding back depreciation and amortization. Is there a consistent trend between how CFOA has developed versus how net income has developed for the last few years, or were there anomalies? 2) Number of line items versus impact per line items (materiality). Which line items are the ones that have the big numbers in there? 3) Changes in operating assets and liabilities. If the company grows fast in revenue (in the income statement), then there tends to be a negative number in the change in accounts receivable (not all those invoices for new revenue are collected yet), or in the case of a company with a subscriptions revenue model there might actually be a positive impact from deferred revenue growing. If a company experiences a sudden drop in demand, that will not only hurt its net income but might also lead to inventory levels going up (which has a negative impact on cash flow). Hope this helps!

[@syremusic_]

Great video. I have a question about Accounts Receivable-what if at the same time that a payment is received, more sales are made for an equal amount? How would that reflect in the cash flow statement? In other words, if AR nets out to 0, how do we know the bills that were paid in that quarter?

[@TheFinanceStoryteller]

Thank you, Dmitriy! The answer is that for purposes of the cash flow statement, we don't really care which bills specifically were paid and which ones specifically were issued. The base assumption in the indirect method of CFOA reporting is that net income fully equals cash flow. If the AR balance went up, then that assumption is invalid, and we adjust for the amount of increase of current AR balance vs prior AR balance. Maybe my video on adjusting entries can help, it covers things like prepaid expenses, deferred revenue, etc.: kzbin.info/www/bejne/a2imhIdslLenjc0

[@syremusic_]

@@TheFinanceStoryteller You are incredible help! Thank you so much.

[@Erez.Levi.Stocks]

Another great video, thank you very much. If I'm in Apple's annual report and I look at operating activities where do I see the salaries? Thanks in advance

[@TheFinanceStoryteller]

Thank you! 🙂 Sadly, the total amount of salaries is not split out as a separate amount. If the cash from operating activities section of the cash flow statement would be stated per the direct method (which it isn't), then maybe it would be given as a separate number. If you turn to the income statement, salary expenses are obviously recorded there as part of the total expenses. However, the income statement is shown in the "functional" format (manufacturing cost in COGS, advertising as well as HQ salaries as well as legal expenses etc. in SG&A), and not in the "natural account" format (where you would itemize salaries, travel expenses, advertising, etc. as line items). What is available at the very bottom of the cash flow statement are two lines of supplemental cash flow disclosure: cash paid for income taxes, and cash paid for interest. But that doesn't help you with your question about salaries.

[@Erez.Levi.Stocks]

@@TheFinanceStoryteller EASY ! like you say haha thank you very much, I appreciate your help.

[@mariadsa703]

Hiw come other current and non current assert dedicted and not added?

[@TheFinanceStoryteller]

The change (as in: the difference between the balance sheet of the previous period and the current period) in other current and non-current liabilities was a source of cash in this case, therefore it is added. In other words, the liabilities went up, which avoids cash flowing out of the company, and is thus a source of cash. The opposite can also occur in a given period.

[@gooddude789]

decrease in income statement And increase in operation cash flow Is this a negative impact?

[@TheFinanceStoryteller]

Hello! Not sure what you are referring to.... Is this question about adding back depreciation (a non-cash item)?

[@Herefor.noreason]

What about NPBT????

[@TheFinanceStoryteller]

Net Profit Before Tax... what about it? The indirect method of cash flow reporting starts with net income, so that would be net profit after tax.