How Companies Manipulate Cash Flow

While we usually think of companies manipulating earnings, they can also manipulate cash flow. In particular, companies have an incentive to manipulate operating cash flow.
Companies achieve this by:
(1) shifting cash inflows from the investing or financing section to the operating section of the statement of cash flows
(2) shifting cash outflows from the operating section to the investing or financing section of the statement of cash flows
(3) boosting operating cash flow with one-time activities
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[@ryner.k4963]

I really like this kind of topic, that nobody teaches u in school, my lecturer just told me to practice hard to score in accounting. Everyone knows how to workout financial statements with spreadsheets, not everyone can manipulate/detect discrepancies from financial statements.

[@Edspira]

I'm glad you found the video helpful!

[@jd5787]

Super timely. I was looking for exactly this info! Thanks. Any plans to dig deeper into this topic?

[@Edspira]

Glad you found the video helpful! This is the last video in a 27-video playlist on financial statement analysis. I might make more videos on cash flow manipulation in the future, but the next series I'm going to roll out is about IFRS 16 (leases). After that I'm producing a series on ALM (asset-liability management) for banks

[@Unknowledgeable1]

@@Edspira thanks for the video! I'm pretty interested in this financial statement manipulation topic. Do you think auditors or forensic accountants would have a lot of knowledge on this topic?

[@vinhnguyen3199]

I have subscribed many channels, but I believe this is the best channel with greatest explanations

[@Edspira]

Wow, thank you!

[@atulbakshi8949]

This lesson was really helpful, thanks for enlightening.

[@JonesDawg]

Thank you Professor!

[@scooby7877]

What would tell you about the opposite, if net income is negative and OCF is positive

[@jaysonvalbarez935]

if you think about it, if net income is negative you have more expenses than revenue. if you have a positive OCF it's more related to balance sheet items, maybe you have a bunch of collectibles that haven't been recorded as revenue which will result in a positive OCF, which is one of the reasons for having a negative NI. this is only one scenario

[@dmba2582]

Isnt delaying account payables and improving account receivables (perhaps through supplier financing mechanism) a legit way to optimize working capital?

[@Edspira]

There's nothing wrong with delaying payables to improve working capital. But if a company's operating cash flow increased by from $4 billion to $6 billion simply because accounts payable went up by $2 billion, you shouldn't expect a similar increase the next period. There's a limit to how long you can make your suppliers wait for payment; eventually, they'll stop being your supplier

[@tomarshivang]

But don't you feel, it doesn't matter while doing the analysis for long period of time for e.g. say 5 or 10 years? I mean they can't delay these things forever.

[@Edspira]

That is correct, but managers of publicly-traded companies are often focused on the short-term

[@najblack5956]

Won’t this make their taxes higher ?

[@summerbreeze5115]

Why?