So here are some of Apple’s FY22 numbers reflected in the visual: Non-cash charges : they are the expenses that don’t involve any cash outflows.Ĭhanges in working capital refer to the movement of current assets and liabilities over the period.Ĭash from investing : In red, I’m showing the net cash used in investing activities.Ĭash from financing : In red, I’m showing the net cash used in financing activities. We use the net income as a starting point and add back the non-cash transactions to calculate the operating cash flow.Ĭash from operations : In green, I’m showing the adjustments made to calculate the operating cash flow. Net income: In the top left, we start where the income statement ended for the period (net profit or net loss). So as an example, let’s use the largest company in the world, Apple (AAPL), using their cash flow statement for their fiscal year 2022 or “FY22.”įirst, you should notice that the cash flow statement starts where the income statement ends: with the net income.Īpple FY22 Cash flow statement - Chart by App Economy Insights I love using visuals to help us digest financial statements. This section shows how much cash a company is raising from investors or borrowing from lenders. This section shows how much cash a company uses to invest in its future growth.įinancing activities are things like issuing new shares or taking out loans. Investing activities include buying or selling long-term assets, such as property and equipment, or securities. This section shows how much cash a company generates after selling products or services and paying for operating expenses, from rent to salaries. Operating activities are the day-to-day activities of a business. Three sections are included in a cash flow statement: operating activities, investing activities, and financing activities: It means they do not involve any cash outflow at the time of recording, but instead, they reduce the net income (profit).Ī cash flow statement shows the actual cash coming in and going out, while an income statement shows the company's profits or losses. In addition, some expenses like Depreciation, Amortization, and deferred tax, are non-cash expenses. In this case, the expenses will be recorded when the goods are received, but the cash will be paid out later. On the other hand, a company may purchase goods on credit and pay for them later. In this case, the revenue is recorded when the goods are sold, but the cash may not be received until later. Revenue is recorded when it is earned, regardless of when the cash is received, and expenses are recorded when they are incurred, regardless of when the cash is paid.Ī company may earn revenue by selling goods on credit. Revenue and expenses are not always timed in line with cash inflows and outflows because they are recorded in different ways. Still confused? Here is a short accounting breakdown: A company can have positive cash flow but be unprofitable, and vice versa. You can find other articles in this series on our website:īefore we analyze a cash flow statement, it's essential to understand that cash and profit are not the same.Ĭash refers to a company's money on hand, while profit is calculated by subtracting all expenses from revenue. We'll use examples and illustrations to ensure you don't fall asleep at the wheel. In this series, we'll break down each financial statement and explain what they're all about. These three documents are like the holy trinity of finance, and understanding them is crucial to making informed decisions about a company. It’s a snapshot at the end of a period.Ĭash flow statement: shows how a company's activities have affected its cash position over a specific period. Income statement (Profit & Loss): shows a company's revenue and expenses over a specific period, resulting in a net profit or loss.īalance sheet: shows a company's assets, liabilities, and equity at a specific point in time. Welcome to the third article of our three-part mini-series on the three primary financial statements that every business owner or investor should know: Over time, I’ll cover and explain more complex topics in plain English. You can return to these articles when you are unsure about specific financial concepts or want a refresher. So we launched a recurring series called □ How To Analyze. Several community members have requested an explainer on basic financial terms.
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