 | The Analysis of the Cash Flow Statement
After reading this chapter you should understand:
- How free cash flow can be calculated from reformulated
income statements and balance sheets without a
cash flow statement.
- How the cash conservation equation ties the cash flow
statement together to equate free cash flow and financing
cash flow.
- The difference between the direct and indirect calculations
of cash from operations.
- Problems that arise in analyzing cash flows from GAAP
statements of cash flow.
- What reformulated cash flow statements tell you.
- How to examine the quality of reported cash flow.
After reading this chapter you should be able to:
- Calculate free cash flow from reformulated income
statements and balance sheets.
- Calculate free cash flow by adjusting GAAP cash flow
statements.
- Reformulate GAAP statements of cash flow to identify
operating, investing, and financing cash flows distinctly.
- Reconcile the free cash flow from GAAP statements to
that calculated from reformulated income statements
and balance sheets.
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