Running a Profitable Business: Understanding Cash Flow

Great businesses can fail because of improperly managed cash flows. Learn the difference between net income and operating cash flow and how to manage your cash flow for growth.

Introduction

• Understanding cash flow analysis

1. The Importance of Cash Flow Analysis

• Home Depot, 1985: Case study
• Net income is not the same as operating cash flow
• Cash flow problems kill companies

2. Overview of the Statement of Cash Flows

• Introduction to the statement of cash flows
• Overview of the statement of cash flows
• Practice categorizing cash flows
• Deducing cash flow statements
• Interpreting Walmart's statement of cash flows

3. Using Cash Flow Data to Make a Loan Decision

• Mortgage loan application
• Interpreting free cash flow statements
• Relationships in cash flow statements
• Determining loan decisions
• Classifying a cash cow company

4. Convert Income Statement Data to Operating Cash Flow Data

• The Jim Stice operating cash flow matrix
• Understanding the direct method
• Understanding the indirect method
• Operating cash flow data as an IPO reality check
• Identifying economic performance
• Operating cash flow problems from high growth

5. Managing Cash Flow

• The Home Depot story revisited
• Managing operating cash flow
• Managing investing cash flow
• Managing financing cash flow

6. Cash Flow Numbers for Some Real Companies

• Tough times in 2008, except for Exxon Mobil
• Analyzing General Motors’ free cash flow
• Apple: Cash flow data helps unravel accounting issues
• The danger of free cash flow

Conclusion

• Manage company cash flow