How to Read a Cash Flow Statement - With Free Cash flow Formula

TL;DR

Analyzing Nike's cash flow for the fiscal year ending May 31st, 2017, highlighting operating, investing, and financing activities.

Transcript

hi in this video we're gonna walk through Nikes most recent annual cash flow statement this is the final part of a three-part series which we walk through the income statement the balance sheet and this one the cash flow statement if you'd like you can always go back and watch those other two videos okay on to the cash flow statement the cash flow ... Read More

Key Insights

• 💯 Cash flow statement divided into operating, investing, and financing sections, reflecting cash inflows and outflows from Nike's core activities.
• 💐 Adjustments to net income in cash flow from operations account for non-cash expenses like depreciation, stock-based compensation, and changes in accounts receivables and liabilities.
• 💐 Investing cash flow includes capital expenditures for assets necessary to run the business, while financing cash flow covers dividends, stock buybacks, and bond issuances.
• 💐 Free cash flow subtracts capital expenditures from operating cash flow to show how much cash a company generates after covering expenses needed to maintain operations.
• 🥶 Analyzing trends in free cash flow over multiple years helps assess Nike's financial stability and growth potential.
• 💐 Nike's cash flow statement provides valuable insights into the company's financial management, operations, and strategic decisions.
• 💐 Understanding cash flow dynamics at Nike aids investors in making informed decisions about the company's performance and future prospects.

Questions & Answers

Q: Why is the cash flow statement important for analyzing a company like Nike?

The cash flow statement shows the actual cash being paid and received by Nike, providing insights into how the company manages its cash flow, operations, investments, and financing activities.

Q: How do adjustments to net income impact cash flow from operations?

Adjustments like depreciation, stock-based compensation, and changes in accounts receivables and liabilities affect cash flow from operations by reconciling non-cash expenses with actual cash movements.

Q: What is the significance of free cash flow in evaluating a company's financial performance?

Free cash flow subtracts capital expenditures from operating cash flow to measure how much cash a company generates after covering expenses needed to maintain or expand its operations, offering a clearer picture of financial sustainability.

Q: How can trends in free cash flow over multiple years provide valuable insights into a company like Nike?

Tracking changes in free cash flow year over year helps investors and analysts gauge the consistency and growth of Nike's cash-generating abilities, offering clues about the company's future financial health and potential.

Summary & Key Takeaways

• Nike's cash flow statement is divided into operating, investing, and financing sections, each crucial for understanding the company's financial health.

• Cash flow from operations involves adjustments to net income, including depreciation and changes in accounts receivables and liabilities.

• Investing cash flow includes capital expenditures and investments, while financing cash flow covers dividends, stock purchases, and bond issuances.