Just to start out, we're trying to understand the basics.
We've got a statement of cash flows, we've got operating, investing, financing.
Investing is LIP.
Financing, very carefully defined.
If it's not investing or financing what is it everybody?
Operating which is kind of the catch all.
A good way to kind of think of this is as follows.
What is this?
It's an eye chart, no, no, no.
It is a balance sheet.
Generally, if it is a current asset or current liability it is operating, generally speaking.
If it is a non-current asset, that would be investing.
If it is a non-current liability or stock-holder's equity, that would be financing.
Again, it doesn't work for everything but it's a good cheat sheet way to look at it.
Again, if it's a current asset or current liability, that's operating.
If it's a non-current asset, that would be investing because we are making an investment.
If it is a non-current liability or stock-holder's equity that's generally financing.
For example, here's where people get confused.
If I borrow money, what is that?
Money is coming in so I'm borrowing money, that's a non-current liability.
If I'm loaning money to you, I kind of have an investment in you, that's a note receivable.
That's an investing activity.
So again, if I borrow money that's financing.
If I loan you money, that's what?
If I loan you money I now have an investment in you, that's investing.
What about the interest?
Interest received, interest paid, dividends received are what?
Operating.
What about dividends paid are what?
Financing.
So again, I just want you to kind of start to get that settled up in your head.
If you look down you'll see a statement of cash flows.
It says "Roger Coe, statement of cash flows".
"Cash flows from operating", and then it says, "Debit, credit and change".
Sometimes you'll have the debit, the credit, you'll have a change column.
Sometimes they'll put them all in one column just as a debit or credit, but a debit credit
change.
Then it has operating but then it says, "Net cash provided or used by operating".
Provided is positive, in-flow.
Used is out-flow, in other words we spent more money than we brought in.
"Investing activities, net cash provided or used".
And then, "Financing activities provided or used".
So let's say in this case for example, we'll start over here we've got our statement of
cash flows.
So we've got our operating activities.
We have debit, credit and a delta is my change.
We'll have all these debits and credits, and debits and credits and debits...
Then the net would be the net cash.
If it's positive it's provided.
If it's negative it's called what?
Used by operating activities and that would be the amount over here.
Let's say for example I got 135.
Same thing, we've got investing activities.
Same thing, debit, credit, change.
Then you've got your financing activities, debit, credit, change.
So we end up with our net change of 150.
Plus beginning cash is 100 equals ending cash, 250.
Now, where do beginning and ending cash come from, what statements?
They both come from what?
The balance sheet.
So really all we're doing is we're saying, "Okay, I started the year with 100, I ended
the year with 250, I have $150 more cash burning a hole in my pocket than I had in the beginning".
Where did that cash come from, that's what we're looking at?
How much came from operating, 135.
How much came from investing, 65.
How much went out for financing, 50.
This plus or minus this, plus or minus this, equals this.
So it's kind of like Jeopardy, remember the show Jeopardy?
Ding!
Statement of cash flows and how did we get there?
That's the question, Bob.
Because we know the answer, the answer is 150.
That comes right off your balance sheet.
What we're trying to figure out is, "Okay, I know the answer is 150, where did the $150
come from"?
How much is here, or here or here?
That's what we're trying to figure out.
So we're trying to figure out where the cash came from, where the cash went to, that is
the net change in cash.
That's what we're trying to figure out.
So that again, is the goal of your statement of cash flows.
We're looking at a statement of cash flows, we've defined what is and isn't cash.
What's called cash and cash equivalents?
We've also looked at to say, "Okay, where is this going to go, where is this going to
sit in the financial statements"?
That is the primary purpose of what?
Of, the statement of cash flows.