Cash Flow Statement Analysis
Overview
The cash flow statement shows actual money movement, which often tells a completely different story than the income statement. Companies can report profits while burning through cash, or show losses while building reserves. This course teaches you to read and interpret cash flow patterns.
We start with the operating activities section, which reveals how much cash the core business generates. You'll learn why net income and operating cash flow differ, working through adjustments for non-cash expenses like depreciation and changes in working capital. A growing gap between reported earnings and operating cash flow often signals trouble.
Following the money
The investing activities section shows capital expenditures, acquisitions, and asset sales. High capital spending might indicate growth investment or just the cost of maintaining aging equipment—context matters. You'll learn to distinguish between maintenance and growth capex.
Financing activities reveal how companies fund operations through debt, equity, and dividends. Consistently issuing new debt to fund operations differs dramatically from borrowing for strategic expansion. We examine what different financing patterns indicate about company strategy and financial health.
You'll analyze cash flow statements from five different companies, identifying sustainable versus unsustainable patterns. The course includes frameworks for spotting red flags like repeated equity raises, declining operating cash flow, or asset sales masking operational problems. These skills help you see beyond accounting presentations to actual financial reality.
What You'll Learn
Course Outline
- Cash flow statement structure and purpose
- Operating activities: adjustments and interpretation
- Working capital changes and their implications
- Investing activities: capex analysis
- Financing activities: debt and equity patterns
- Free cash flow calculation and uses
- Cash flow quality assessment
- Red flag identification
Analysis framework
You'll apply a systematic approach to evaluate cash flow sustainability. Each case study presents a different industry with unique cash flow characteristics.
- Course materials
- Five complete cash flow statement analyses
- Red flag identification checklist
- Free cash flow calculation templates
- Working capital analysis worksheets
Special focus: Understanding the difference between accounting profit and actual cash generation, with real examples of companies that looked profitable but faced cash crises.