26. What is a Cash Flow Statement

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In this lesson, students learned the importance of the Cash Flow Statement. This important document is used to help determine how money flows through a business. Prior to 1987, investors could only examine the health of a company from the income statement and balance sheet. Due to stricter regulations, publically traded companies are now required to also disclose the cash flow statement.
The cash flow statement is broken down into three categories. 1. Operating Activities: This is probably the most important section of the statement because it shows the money that's flowing into the business from the product or service that the company produces. Positive revenues listed on the cash flow statement from other activities are not sustainable in the long term, so that's why this section is so important. 2. Investing Activities: A negative number listed in this section would mean that the company is investing money. A positive number in this section would mean that the company sold an asset in order to generate money. Obviously its better to see a negative number show-up under this section because it implies that the company is continuing to invest the revernues that it produces. 3. Financing Activities: In this section, an investor can identify whether the business is try to raise money or pay off debts. A positive number in this section means the company is incuring debt or dilute the value of their shares. A negative number means the company is paying off debt or increasing the value of their shares (through a share buy back). Generally speaking its good to see a negative number under this section because it means the company is removing their leverage and creating a stronger position for their shareholders.
The Cash flow is a great document to help look at trends and how money flows through a business. Although the balance sheet and income statement are very useful documents for determining the intrinsic value of a stable company, the cash flow statement gives potential investors a glimps into the current conditions of the company and how they manage their resources.

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@angelaarnold9835 9 ай бұрын

Thank you so much for your videos! I learned more from you than my MBA. I wish I found you in 2012, not 11 years later. ❤

@ElliotBrownJingles 5 ай бұрын

Absolutely psyched to have got this far and be moving on to Course Two. I tried going through all these videos about 8 years ago but am giving it another shot. Love this stuff! Great job Preston!

@aarong4220 6 жыл бұрын

Coming to this video series in 2017 and the information is truly timeless! You can clearly see that a value investor has a much higher chance of being continuously successful throughout market highs and lows. Thank you so much for taking the time to simplify the teachings of the great value investors! You deserve way more of a following. Oh well, more for us. :)

@baisazi 4 жыл бұрын

and now 2020 lol

@AndreiBazanov 7 жыл бұрын

Yes Preston, this is really general and basic, but that is exactly what I need!!! Thank you very much. That is the level I am at, and the level at which one can build a very solid foundation. Keep it up. I am planning to re-watch all videos again as soon as I finish.

@charlielandon8751 2 жыл бұрын

I know Im asking the wrong place but does someone know a trick to get back into an Instagram account..? I was stupid lost the login password. I love any help you can offer me!

@tomltomm2866 4 жыл бұрын

Im really already on video 26 with 12-13 pages of notes! most enjoyable class i've ever been in! And it didn't cost me a penny, thank you once again Preston!

@jakestakes9075 4 жыл бұрын

it really is amazing

@chavanprashant78 4 жыл бұрын

Amazing Preston....Hats off to you. You have kept it so simple to understand, i have been struggling for years to understand the Intrinsic value and in general the entire business......Loads and loads of the Thanks....Keep up the good work.

@teamdraught 5 жыл бұрын

Hey Preston, just wanted to let you know you are a legend! Love this series!

@johnnyt9405 2 жыл бұрын

Brilliant! Great stuff as always, Preston. Thank you so much! You bring so much value to people. Stay awesome!

@timifagade3551 4 жыл бұрын

This sort of information is absolutely invaluable this time period as the market is extremely volatile. Thank you Pysh for your work. been watching most of the content judiciously.

@tinnguyen2219 5 жыл бұрын

Thank you so much for SHARING THIS USEFUL DATA! greatly appreciated .

@ivyrosales1081 8 жыл бұрын

thank u for all ur videos ! I love it. u made it so easy to understand. keep up the good work. ur helping a lot of people. :-)

@ronniedioquino7232 9 жыл бұрын

Wow! This is really amazing.... I just finished course 1 and 2 playlist. I find it very informative to those who really wanted to be an intelligent investor. Although, I am just preparing not yet involved in this kind of business. A must watch video to learn and understand the markets.

@ankuragr294 7 жыл бұрын

I have a question. Don't you think dividend received from stocks that the company holds should be listed under investing activities instead of operating activities?

@paulatriedes5348 3 жыл бұрын

Hi Preston, I am currently a young investor looking to retire early, You have helped me a lot during these times, Thank you so much!!!!!

@tapasbiswas3545 6 жыл бұрын

Very helpful video......It's described very detaily....thank you...

@drummersaad 5 жыл бұрын

Amazing effort brother, keep up the good work and thank you.

@kimeyaustralia 7 жыл бұрын

I am very much enjoying your lessons. Thank you very much!

@PatricHua 5 жыл бұрын

Excellent explanation of the cash flow statement. Thank you for making this video!!

@samjones2012 11 жыл бұрын

I watched all of your videos and Finally I am very grateful for effort and time to teach people about Value Investing .

@verabudennaya5437 9 жыл бұрын

This another great video, Thank you Preston.

@2Easy2Draw 9 жыл бұрын

What if the Net change in cash is negative? Is that a good thing or a bad thing? (What do you think the Net change in cash should be in? Negative or positive number?)

@orestesdd 9 жыл бұрын

***** I am currently looking at WFC cash flow statement, and through 2014 quarters, WFC had a net cash going up and down; in fact this is what happened in 2014: Q1 was (188); Q2 was 904; Q3 was (2,603); and Q4 was 1,539, all in USD millions. is this an acceptable behaviour? I ask this because WFC is one of Warren Buffett's darling, and I so happened worked for WFC for 23 years. Should this be alarming? BTW, I also looked at a 5 year period, and its behaviour was very similar with a net cash change being down 3 years out of all 5 years (2010-2014), but it operating activities were UP all 5 years, except for 2012 when it was low , 13,665 in USD millions, when all the other years were above that amount. Thanks for all your videos.

@gauravshivajiraop2259 7 жыл бұрын

You are the best! Thank you very much.. I hope you become more and more successful!

@joshuagaa7009 3 жыл бұрын

thank you

@satheeshr5556 8 жыл бұрын

Hi - These videos are very helpful, thank you. Just a basic question , whats this "Operating Activities", is this the "Net Earnings" ?

@goleadorvenezolano 7 жыл бұрын

Outstanding explanation! Greetings from Venezuela.

@jayamin7855 4 жыл бұрын

Amazing teacher God bless

@VictorKyalo 5 жыл бұрын

how do you use discounted cash flow to value a company from the information in the cashflow statement?

@saisaketh7243 4 жыл бұрын

Excellent video!! Keep on the good work..

@rohitmehra244 4 жыл бұрын

love u thanks for such a great series

@DyJKevin 6 жыл бұрын

very helpful and easy to understand

@19NooNaDa 11 жыл бұрын

I love this video. Thank you

@filodac100 11 жыл бұрын

Thanks for the video. I am going to my lecture tonite with more confidence

@muddyfrog123 4 жыл бұрын

Thanks Preston ! I learnt a lot !

@jaymac21490 5 жыл бұрын

Amazing video, thank you!

@soandrei8785 4 жыл бұрын

God bless you preston

@mihnic0504 3 жыл бұрын

Great lesson. Thanks

@GregorSchafroth 8 жыл бұрын

The beginning of the video sort of implies that incoming money is either accounted for in the income statement or in the cash flow statement. But isn't the most usual case that both statements will disclose the transaction that affect income as well as cash flow?

@ar061788 11 жыл бұрын

Keep teaching brah!

@CE-vd2px 7 жыл бұрын

does having parentheses around the investing activities and financing activities mean the number is negative? I thought u said we want negative investing and financial activities. Can explain?

@rossmurphy4593 7 жыл бұрын

Yes. Parentheses are often used to indicate negative balances.

@ranjeet9868 5 жыл бұрын

First of all these playlists are amazing! Secondly i have a question regarding the investment organisations like ASSET MANAGEMENT COMPANY and BANKS. They have high D/E Ratio and Negative cash flow from operations and positive investment and financial activities. What do you suggest i should look for while investing in AMCs and Banks? Thank you.

@sahilsambyal4968 4 жыл бұрын

Simply follow Warren Buffett's 3rd rule: If you don't understand a company, better don't invest in that.

@vincentbader7874 2 жыл бұрын

can anyone explain to me, why company B raises money, which they don't seem to use (seeing to total cashflow being positive)?

@TheSelfMadeSuccess 7 жыл бұрын

Very good! Thanks

@johnqahharov2989 6 жыл бұрын

great video bro thank u so much

@CE-vd2px 7 жыл бұрын

How important is this cash flow statement in your opinion? Does this statement make or break a company that is great on the balance and income sheet?

@jontattum1476 4 жыл бұрын

great vid!

@Miossoty1 4 жыл бұрын

Wouldn't other income sources be written on the statement of profit/loss as "other income"? I see that sometimes

@raphaeldasilva3269 5 жыл бұрын

How many years of cash flow statements do we have To watch for To get a right trend ?

@FirstLast-tx3yj 5 жыл бұрын

how to buy stocks and bonds online? what broker is advised?

@youcan5863 3 жыл бұрын

Thank you 🙏

@MO-pn8ip 3 жыл бұрын

Thanks man ...really appreciate that!!

@whoeverwhoever400 10 жыл бұрын

so company A is better than B even they have less cash in their hand at the end of the year?

@ameyapatil1139 7 жыл бұрын

excellent excellent excellent

@Tronading 11 жыл бұрын

Preston, In the example of the company B, which has a really large amount in the 'Net Change in Cash', why would a company keep all that money in Cash year after year? I understood that if they're a healthy company they might be preparing for an acquisition, but if they're not so healthy, wouldn't it make more sense for them to either pay off some of its debt or even use it to invest in something rather than keeping as cash? Great videos!! I bought the book already, so that's next :)

@robertocanales1201 3 жыл бұрын

Thank you very much! 😑🙏🏼

@The_Scarlet_Pimpernel 4 жыл бұрын

Going off the number of views and the number of subscribers, I can't believe how undervalued these videos and courses are!

@abhideepkumar3585 9 жыл бұрын

hey, it means current EPS(earning per share) is not main criteria, because company B increasing current eps by increasing debt or lowering invest in new technology which cause eps down in future. So, CASH FLOW STATEMENT is very important for any company.

@TheHeavenforever 11 жыл бұрын

very impressed. I get it. :)

@AnnieBugWilliams 6 жыл бұрын

It is difficult when all the numbers are 100 to start with. It is much easier to follow if the Income, Bonds and Shares etc had different numbers to start with. Maybe also something a bit more realistic, such as the Income being 2400, the bond being 300 and the shares 100.

@martinfalk772 11 жыл бұрын

Thanks again for these videos Preston, very helpful! You say that a negative number is good when it comes to investing activities. But the company could be doing bad investments that will get you a loss no? It feels like it doesnt has to be good.

@sanjeen2503 4 жыл бұрын

Probably it's a good sign in the sense the company is willing to take the risk of investing, which means they are having surplus cash and see a good future. Although it might be possible that they made a stupid investment decision, a good company has less chances of doing so (unless they were finance companies)

@user-vi9oh6mh4r 4 жыл бұрын

thank u very mutch

@SenimaInvesting 4 жыл бұрын

exelent

@VR1679 3 жыл бұрын

How to calculate it

@mathiasg5514 5 жыл бұрын

In your playlist this lesson, 26, comes after lesson 27.

@mariammora695 10 жыл бұрын

Thanks for the video #UltimátumAlRégimen #SOSVenezuela

@AnonymousAnonymous-zv6ty 5 жыл бұрын

Great way to explain investing...! thumbs up!

@yamalisrihari6015 4 жыл бұрын

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@daniels4149 6 жыл бұрын

👍💥💲

@abdulsamiasif4769 5 жыл бұрын

I could not understand that leson

@Christian-mn8dh 5 жыл бұрын

Anyone here 2019???

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@user-jt3fo4zj7h 5 жыл бұрын

@yamalisrihari6015 4 жыл бұрын

World is very big we can live where we have fun rights in the government there we have highly security I am educated and business experience in all fields real estate is my finger tips work two sites I purchased 3 lakhs after in three years we have bid offer for my site they are ready to pay 15 lakhs on the site I designed beautiful home ,another sites three sites I purchased itself 2.75 lakhs now it cost 10.5 lakhs offer but it is not sale it. Yshk viswanatham MscBed.