FCFF and FCFE Ratios
Other cash flow measures such as free cash flow to the firm, and free cash flow to equity, can also be instrumental in the valuation of a company and its equity securities. Generally speaking, free cash flow refers to the…
Convert Cash Flows from the Indirect to Direct Method
Sometimes, a company may prepare the cash flow from the operations section of its cash flow statement using the indirect method. However, users of its financial statements may desire to review the direct-format cash flow from operations. This may arise…
Direct and Indirect Cash Flow Statements
The first step in preparing the cash flow statement involves the determination of the total cash flows from operating activities. The cash flow from the operations section of the cash flow statement can be prepared using either the direct method…
Link Between Cash Flow Statement and Income Statement
In the preparation of a company’s cash flow statement, data from both its income statement and balance sheet is utilized. An understanding of the linkages among the cash flow statement, income statement, and balance sheet is useful for understanding a…
Contrast Cash Flow Statements – IFRS – US GAAP
Several differences exist between how the cash flow statement is prepared under IFRS and US GAAP. The most significant difference lies in the fact that IFRS gives companies more flexibility in regard to how interest paid or received and the…
Cash Flows from Operating, Investing, and Financing Activities
The cash flow statement gives information on a company’s cash receipts and payments during a specified period of time. This information can help users of financial statements (creditors, investors, analysts, etc.) evaluate a company’s liquidity and solvency. Components of the…
Ratio Analysis to Forecast Earnings
Data on the economy, industry and company are used in deriving forecasts for a company. The results of financial analysis, including common-size and ratio analysis, are integral to this forecasting process. The forecasts of a company’s growth and expected relationships…
Portfolio Management Process
Upon determining the type of investment client and their financial goals, a portfolio manager takes a series of steps to ensure the client meets their goals and needs. 1. The Planning Step Once a portfolio manager has established a client’s…
DC and DB Pension Plans
Employees of both private and public companies often save and invest for retirement via defined contribution (DC) pension plans in which they assume the investment risk. In the case of a defined benefit (DB) pension plan, the responsibility and investment…
