Hello,
I was wondering if someone could help me with building my cash flow as I am unable to make it tie to my beginning and ending cash. It is for a homework and we are asked to build financial statements from scratch. I have my Balance sheet and income statement, but my cash flow isn't tieing.
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post the problem
Thanks.
here is some screenshot of my balance sheet:
and screenshot of my income statement:
Please let me know if you have any questions, I appreciate your help.
Please help
Post a screenshot of what you have for the CFS.
Where is the CFS? You have a CFS haven't you?
EDIT: have you ever heard of colour coding? Blue / Black / Green?
Unfortunately I haven't heard of colour coding, thanks for the heads up :)
Here is my CF:
First things first, make a line for FCF but, if I had to guess, your problem is in changes in NWC.
Yeah you'll need the CF statement but you can start building it. Start with Net Income, add back D&A (it's a non-cash expense that you burden Net Income with) and add back (or subtract) changes in NWC (net working capital) to calculate CF from Operations. Subtract Capex (which you'll need the CF statement for) and you'll get FCF. From there you'll need CF from Investment and CF from Financing Activities and your ending cash balance (changes in cash from this period plus begging cash) should equal current cash on the balance sheet. You can't get the last two components without the CF statement.
What he said works.
I've got some examples as well. Also You generally should NOT try to reverse engineer the previous year's cash flow statements. It's not a value add to try to break everything down individually if you're doing a simple valuation or M&A model since you simply don't care about their individual line items.
When is it due? Since I'm currently sitting on my arse waiting for moving arrangements to be ready in a few days I'm open to setting up a Skype session and you can use Screen sharing to walk me through it.
Agreed. It's also helpful to note that you don't really have to do that in real life, changes in NWC are provided for you in Ks and Qs.
Thank you everyone.
I have few questions: 1. Since you are saying that my issue is NWC, should I play with the Balance sheet until I get a reasonable WC ? 2. My ending cash is 19,807,000 but I am getting 30,028,000 in my CF. the difference seems to be 10,221,000 which seems to be surprinsingly the sum of Net income and Depreciation, 5067000 and 5154000 respectively. Am I missing something ? 3. It is due next week, the main purpose of this homework is to create a company and show the financials and talk about the assumptions. Can you please send me an inbox with your skype name so I can add you ? 4. I am more concerned getting my Cash Flow statement correct because so far it is showing a "net increase" of 24,500,000. Please help me get my Cash Flow statement correct.
You still need to have some basis for a forecast, and post-merger statements are going to require a reconciliation.
Im pretty sure the owners equity section is a little wonky and that's whats throwing you off (the assignment was poorly designed). The owners equity is increased by both the net income through retained earnings for the year and the additional paid in capital but for some reason it looks like the assignment lumped them both together as additional paid in capital. So in reality you're double counting your net income (first time at the top of the CF statement which is good and then again when you have the cash flow from financing). CF from financing should be the figure you got, less Net income.
Also you're not accounting for your Depreciation in your CapEx Figure you added it back into the Net Income figure but then used the Net PPE figure when doing your Capex rather than gross. Think of it this way, when you buy a building the cash outflow of the building is its gross figure, not the gross minus depreciation at the end of the year, so while the depreciation is a "non cash expense" that doesnt mean you exclude it from the Capex equation.
dammit FossilFuels you beat me to it with my slow ass typing. OP see the above narrative.
I am the one who created the Balance sheet, income statement and thus Cash flow. Do you think I should split the paid in capital section into retained earnings and owner's investment ?
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