【文章內(nèi)容簡介】 an original cost of $ and was sold for $ Exercise Background (p. 3) Notes to the financial statements are a critical source of information. bc BOS Copyright169。 1998 Bain amp。 Company, Inc. 21 CU7010598KRA Cash Flow Operating Cash Flow *Cash is defined as cash plus marketable securities minus shortterm notes **I/S = ine statement, SCF = statement of cash flows, B/S = balance sheet + +/ +/ +/ = 1. Profit before interest and tax (PBIT) 2. Depreciation 3. Other noncash expenses/ine 4. Decrease/increase in working capital (excluding cash) 5. Taxes paid 6. Tax impact of interest ine/expense Operating cash flow = 7. Capital expenditures Investing cash flow +/ +/ +/ +/ +/ = 8. Interest ine/expense 9. Tax impact of interest expense/ine 10. Increase/decrease in longterm debt 11. Increase in outstanding stocks/shares 12. Dividends 13. Changes in other accounts Financing cash flow 14. Reconcile with change in cash* from Balance Sheet Net cash flow Source** I/S SCF, B/S and Notes Notes B/S I/S, B/S I/S I/S I/S B/S B/S B/S, I/S B/S SCF, B/S and Notes SCF, B/S and Notes bc BOS Copyright169。 1998 Bain amp。 Company, Inc. 22 CU7010598KRA Cash Flow Step 1 Profit Before Interest and Tax Where to find: Process: Comments: ?Ine statement ?It can be labeled in many different ways, including profit before interest and tax, profit from operations, operating profit, and earnings before interest and tax ?If ine statement is provided, pick number from ine statement ?If ine statement is not provided, calculate profit before interest and tax: Profit before taxes Interest ine and other ine (earned) + Interest expense and other expenses (incurred) Any onetime gains included in profit before taxes + Any onetime losses included in profit before taxes = Profit before interest and tax (PBIT) ?The goal is to get profit before interest payments, tax payments, and extraordinary items bc BOS Copyright169。 1998 Bain amp。 Company, Inc. 23 CU7010598KRA Cash Flow Step 1 Profit Before Interest and Tax Answer Profit before interest and tax*: $1, 1996 Operating cash flow begins with profit before interest and tax. *Shown as profit from operations on The New England Razor Company’s ine statement bc BOS Copyright169。 1998 Bain amp。 Company, Inc. 24 CU7010598KRA Cash Flow Steps 2 and 3 Depreciation and Other NonCash Ine/Expenses Where to find: Process: ?Depreciation statement of cash flows, or calculate from Balance Sheet and Notes ?Other NonCash Ine/Expenses Notes ?Review assets and liabilities that are not taken into account in working capital (elements of working capital include current assets and liabilities with the exception of cash, tax items, and financing assets and liabilities (., interest and dividends payable)) ?Ask two questions: –was the item noncash? –was the item included in profit before interest and tax? ?If the answer to both is yes, adjust profit before interest and tax –., depreciation add back to profit before interest and tax –., loss on sale of asset add back to profit before interest and tax ?If answer to either question is no, make no adjustments bc BOS Copyright169。 1998 Bain amp。 Company, Inc. 25 CU7010598KRA Cash Flow Step 2 Depreciation Where to find: Process: ?Statement of cash flows, or calculate from Balance Sheet and Notes ?If depreciation is provided in the statement of cash flows, pick number from there ?If not, calculate depreciation: Accumulated depreciation at year end Accumulated depreciation at year beginning + Depreciation from sale of asset = Depreciation expense for the year ?Depreciation from sale of asset: Original cost of asset Proceeds from sale of asset Losses incurred = Depreciation from sale of asset bc BOS Copyright169。 1998 Bain amp。 Company, Inc. 26 CU7010598KRA Step 2 Depreciation Answer (p. 1) Depreciation from sale of asset = The original cost of asset proceeds from sale of asset losses incurred = $ $ $ = $ Depreciation expense for 1996 = Accumulated depreciation at year end accumulated depreciation at year beginning + depreciation from sale of asset = $2, $2, + $ = $ Cash Flow Depreciation is a noncash expense. Therefore, it is added to profit before interest and tax in the operating cash flow. bc BOS Copyright169。 1998 Bain amp。 Company, Inc. 27 CU7010598KRA Cash Flow Step 2 Depreciation Answer (p. 2) Acc um ul at edde pre c ia tion (y ear en d)Acc um ul at eddep r ecia t io n(y ea r be gi nn in g)D ep reciatio n f r oms al e of ass et sD epr ecia t i on ex pe ns e$2 , 62 M($2 , M M )$18 M $38 M$0$50 0$1 ,0 00$1 ,5 00$2 ,0 00$2 ,5 00$3 ,0 00 Millions of DollarsThe depreciation expense for the year can be calculated from the balance sheet and notes. + = bc BOS Copyright169。 1998 Bain amp。 Company, Inc. 28 CU7010598KRA Cash Flow Step 3 Other NonCash Expenses Answer Loss on equipment sold during the year: $ (from Note 3) 1996 Other noncash expenses are added to profit before interest and tax in the operating cash flow. bc BOS Copyright169。 1998 Bain amp。 Company, Inc. 29 CU7010598KRA Cash Flow Step 4 Change in Working Capital (Excluding Cash) Where to find: Process: ?Balance sheet ?Working capital = current assets current liabilities ?Review each current asset and current liability Include: Exclude: ?Cash and cash equivalents ?Tax items –include in taxes paid calculation (Step 5) ?Financing assets and liabilities, such as: –interest payable –dividends payable –current portion of long