AFS

Cash Flow
 Cash Flow
• Operating Activities:
Receipts: cash from customers, interest received, dividend
received, marketable securities
Payments: salaries, purchases, other exp, marketable
securities, interest paid, tax paid

• Investing Activities: Fixed assets, long-term securities

• Financing Activities: Loan, equity, dividends paid

 Direct Method
Direct Method: Start from Net Sales…T-A/C of cash

Cash Received from Customers:

Net Sales - increase in A/R + increase in unearned revenue
(customer advances)

Cash Payment to Suppliers:

COGS + Dep – increase A/P + increase in Inv – Inv write-off

Cash Operating Expense:

Marketing + Admin + General + increase in prepaid exp
 Indirect Method
Indirect Method: Start from Net Income

Add:
Depreciation & Amortization
Decrease in current assets
Increase in current liabilities
Loss on sale of assets

Subtract:
Increase in current assets
Decrease in current liabilities
Gain on sale of assets
FCF (Firm) = cash from ops + Int * (1-tax rate) –
net capital exp