Analyzing The Cash Flow Statement

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This course presents a Forensic Accountant approach to analyzing a company’s published Cash Flow Statement.

A cash flow statement is a financial statement prepared by management that summarizes the amount of cash and cash equivalents entering and leaving a company. The cash flow statement measures how well a company manages its cash position, meaning how well the company generates cash from its operations to pay its debt obligations, fund its operating expenses, retain cash for future needs, and return cash to shareholders. Cash Flow Statements can include an Operating Cash Flow Statement and a Capital Expenditure Cash Flow Statement.

Knowing how to read and understand a cash flow statement can enable you to extract important data about the financial health of a company.

When evaluating cash flow, most investors start with operating cash flow (OCF) as reported on a company’s financial statements.  Generally, a high and consistent level of OCF is a good sign of business health and sustainable cash generating ability.  But what if reported OCF isn’t actually generated from a company’s operations, but rather through other sources not directly tied to its core business?  In this situation, a company’s operational health could appear better than it actually is. Determining this is the role of Forensic Accounting.

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Analyzing The Cash Flow Statement