Business2257cheatsheet

Hour 1

-Role, decision, goals

-Business size-up (REMEMBER IMPLICATIONS)

• Industry analysis
• Consumer analysis
• Competitive analysis
• Corporate size-up (corporate capabilities)

Hour 2

-Make SCF

Add sources, subtract uses

Statement of Cash Flows

1. Operations

Net Income (after tax)

Add: Depreciation (from statement of earning)

Add: loss on sale OR Subtract: gain on sale

Add/Subtract: Changes in current accounts

Add/Subtract Changes in Working Capital (from SoFP)

Accounts Receivable

Inventory

Accounts Payables

NET CASH FLOW FROM OPERATIONS

2. Financing

Add/Subtract: increases and decreases from SOFP

[Reconstruct retained earnings (or owner’s equity) to find dividends]

Subtract: dividends

NET CASH FLOW FROM FINANCING

3. Investing

[Changes in non-current assets, excluding trading investments]

[Reconstruct and depreciable asset accounts (same as depreciation from earlier), don’t forget about any disposals, loss, or gains, PLUG for net purchases]

Add/Subtract: Net Purchases (Add if PLUG is on debit side, subtract if credit)

NET CASH FLOW FROM INVESTING

NET CASH FLOW

BEGINNING CASH (last years ending cash)

ENDING CASH (should match)

• SCF analysis→ Implications from statement

1a. Is NCF from operations positive or negative? Why?

1b. How does our working capital compare? Is there a cash gap (A/R+A/P + Inventory), and are we worried about it? → if it is a large and increasing use of cash then it is bad. I other words, we want this number to be positive or to be more positive then the previous year

2a. Major sources and uses → identify 2 largest, don’t include non-cash

2b. Are they short term or long term

3. Matching short with short and long with long? (be sure to look at relative size)