“Walk me through the cash flow statement.”
"Walk me through the cash flow statement." This is the natural next step after the income statement and balance sheet — and the strongest answers reconcile Net Income to an actual cash balance with real numbers. Use the figures below for Atlas Manufacturing Inc. — continuing from Case 1 and Case 2 — to build out its cash flow statement for the same fiscal year.
Task: Using the figures for Atlas Manufacturing Inc. below, compute Cash Flow from Operations, Cash Flow from Investing, Cash Flow from Financing, and the resulting Ending Cash Balance.
The following figures are reported for the same fiscal year as Cases 1 and 2:
| Line Item | Amount |
|---|---|
| Net Income | $52.5m |
| Depreciation & Amortization (D&A) | $30.0m |
| Increase in Accounts Receivable | $15.0m |
| Increase in Inventory | $10.0m |
| Increase in Accounts Payable | $8.0m |
| Capital Expenditures (CapEx) | $45.0m |
| Debt Repayment | $12.0m |
| Dividends Paid | $5.0m |
| Beginning Cash Balance | $76.5m |
CFO starts at Net Income and adjusts for non-cash items and working capital changes.
CFO = Net Income + D&A − Increase in Accounts Receivable − Increase in Inventory + Increase in Accounts Payable
Using this formula, compute CFO.
Investing activities capture spending on long-term assets — here, just CapEx.
CFI = −Capital Expenditures (CapEx)
Using this formula, compute CFI.
Financing activities capture flows to and from debt and equity holders.
CFF = −Debt Repayment − Dividends Paid
Using this formula, compute CFF.
Summing the three sections gives the Net Change in Cash, which rolls forward from the Beginning Cash Balance.
Ending Cash Balance = Beginning Cash Balance + CFO + CFI + CFF
Using this formula, compute the Net Change in Cash and the Ending Cash Balance — and check it against the Cash line on the balance sheet from Case 2.
Try answering out loud first — then reveal the model answer and compare.