Читать книгу How to Read a Financial Report - John A. Tracy - Страница 16

The first section of the statement of cash flows attempts to explain the differences between cash flows and revenue and expenses, line by line. But in our experience business managers, lenders, and investors generally cannot make heads or tails of this section of the cash flows statement. The main reason is that they don’t have a clear picture of how revenue and expenses are recorded. Do you?

Exhibit 3.2 compares the company’s revenue and expenses cash flows for the year with its revenue and expenses amounts for the year. The amounts for revenue and expenses are recorded on the accrual basis. This means that the transactions and other developments that affect the business are recorded when the economic event takes place, which is often before or after when cash actually changes hands. For example, this company, like many businesses, offers its customers credit. The sale is made today, but the business does not collect cash until a month or two later. The sale is recorded today but the corresponding cash is not recorded until later.

EXHIBIT 3.2 REVENUE AND EXPENSES: CASH FLOWS VERSUS ACCRUAL AMOUNTS

Dollar Amounts in Thousands for Year Just Ended
	Cash Flow Amounts	Accrual Amounts
Sales of Products	$151,680)	$152,000)
Cost of Products)	$(34,760)	$(33,800)
Operating Costs)	$(11,630)	$(12,480)
Depreciation Costs)	$.(000.0)	$.(0.(785)
Interest on Debt)	$.(0(520)	$.(0.(545)
Income Tax)	$).(1,665)	$(.(1,748)
Net Amount)	$.(.3,105)	$.(.2,642)

Notice in Exhibit 3.2 that the differences between cash flows and accrual amounts do not differ too much—except for those related to depreciation. The cost of a long-term operating asset, such as a building or piece of heavy equipment, for example, is allocated over the operating life of the asset. The allocation of its cost over the useful life of an asset is a prime example of the accrual basis of accounting. Deprecation for the year is not a cash outlay; cash was paid when the asset was acquired. Notice in the “Investing” section of the cash flows statement that the business made major cash outlays for long-term operating assets.

A document comparing cash flows with accrual amounts, like the one shown in Exhibit 3.2, is a tool of explanation. It is not a financial statement. It is not included in a financial report with the three required financial statements (i.e., income statement, balance sheet, and cash flows statement). Exhibit 3.2 should help you understand why cash flow from operating activities differs from bottom-line net income for the year. In reading an income statement, keep in mind that you are reading accrual-based amounts for revenue and expenses. Bottom-line net income is an accrual-based number. The net cash flow result of revenue and expenses is found in the statement of cash flows. Chapter 14 offers further analysis of cash flow, in particular cash flow from profit (or loss if that’s the case).