A Finance Survival Kit. GEM2508. Frederick H. Willeboordse email@example.com. Lecture 3. The Cash Flow Statement. Basic Excel Understand the elements of the Cash Flow Statement Make a simple Cash Flow Statement with MS Excel. Today’s Lecture. ?. Where does it go?.
Frederick H. Willeboordse
The Cash Flow Statement
Graphs are easy to make. E.g. type some numbers and select them.
Then go to the graph tool button and click on it.A handy wizard will pop up that gives you many options but for starters you can just click next.
And this is the result that we get.
The graph can be moved around and of course there are many options for labeling and representing the data.
When selecting a graph by clicking on it, the data are highlighted by a colored box (blue in this case).
The Solver can be found in the Tools menu of Excel. If it’s not there, it can be installed by going to the “Add-ins” menu item and selecting the Solver Add-in.
The power of the solver is that is can do mathematics without formulas. This is extremely useful when formulas are difficult or impossible to find.
For example, we have the situation to the left and we would like to find a value for cell B2 such that our calculation in cell B5 gives 2.5 as a result.
Of course, we could easily do this by deriving a simple formula.
But this time, let us use the solver.
Go to the Tools menu and click on Solver.
Select the Target Cell, the value and choose which cell should be changed.
The Solver will try to find a solution and automatically enter it in the spread sheet.
A box asks you to confirm the solution.
Click OK and we’re done.
The If-then statement allows you to do logical tests.
In this case we compare two numbers and indicate whether the first number is bigger or smaller.
The syntax of the if-then statement is given by:
Note the quotation marks. These indicate that the text between them is a so-called string, i.e. actual text and not the name of a variable or so.
Where does it go?
In daily life, we all know the experience .. Where did the money go? It’s good to know!
In business it’s essential to know!
The Cash Flow Statement is the third of the three basic financial statements. It is closely related to matters concerning the daily operation of a company.
The Cash Flow Statement shows where the money goes (out-flows) and where it comes from (in-flows) during a certain period of time.
It also shows the net in- or out-flow during that period of time. This is an extremely important number in the financial management of a company!
One way to look at the difference between the three basic financial statements.
While the Balance Sheet shows cash balances and the Income Statement where the money comes from or goes to, the Cash Flow Statement shows why cash increased or deceased.
In other words:
Let’s first clean this up a bit …
and then look at it in more detail …
Use the Center and Merge Button
Change the Font
Underline before the subtotals
Make the main items italic
Make the total bold
This is often called the T-account approach. Of course this only works if the relevant information is actually listed in the Income Statement and Balance sheet.A Simple Cash Flow Statement
Let us have a look at the items in the cash flow statement one by one.
Net Change in Cash Balance
The net change in cash balance is an important indicator for how well the company will be able to continue doing business.
If the net change is strongly negative and the company has little or no cash left, it will almost certainly need new loans. It is good to know that one needs to plan for that.
On the other hand if the cash flow is positive and there are little debts, extra cash for new investments or for dividends will be available.
Now let us look at how we can actually obtain some of the items from the Balance Sheet and the Income Statement.
Cash Flow from Operating Activities
(Parts of) the Cash Flow Statement can be derived from the Balance Sheet and the Income Statement by analyzing changes.Key Points of the Day