Courses / Cash Flow

Cash Flow

31 Lessons | 6 Quizzes

Cash flow is the movement of cash into and out of the company. This course culminates what we we’ve been building towards through the previous courses on Revenue Model, Cost Structure and Earnings Power to determine how much cash a company is generating. Ultimately, valuation depends on the company’s ability to generate cash. Once we know how much cash the company will generate in the future, we’ll have the main building block we need to determine the intrinsic value of the stock.

Key Takeaways:

  • Different line items on the Cash Flow Statement
  • Relationship between free cash flow and valuation
  • How to calculate unlevered and levered free cash flow

Lessons

1. What is Cash Flow

4:01

Cash flow describes the movement of cash into and out of a company.

2. Introduction to Cash Flow Statement

4:04

Cash Flow Statement is where the company records the actual movement of cash.

3. Cash Flow from Operations

2:57

Cash Flow from Operations represents the cash flow generated from operating the company (i.e. selling products and paying for expenses).

4. Cash Flow from Investing

4:44

Cash Flow from Investing represents the cash flow due to reinvesting into and divesting pieces of the company.

5. Cash Flow from Financing

2:09

Cash Flow from Financing represents the movement of cash between the company and its investors, both equity investors and credit investors.

6. Relationship Between the 3 Cash Flow Categories

2:56

In this lesson, we'll learn about the relationship between Cash Flow from Operations, Cash Flow from Investing and Cash Flow from Financing.

7. Treatment of Non-Cash Items

2:25

The first step to bridge from earnings to cash flow is to neutralize non-cash items.

8. Changes in Working Capital

2:49

Changes in Working Capital reconciles the time difference between accounting recognition and cash settlement.

9. Capital Expenditures (CapEx)

4:33

Capital Expenditures ("CapEx") represents the cash used to pay for capital assets that will deliver long-term value to the business.

10. Growth vs. Maintenance CapEx

2:08

In this lesson, we'll learn about the distinction between Growth CapEx and Maintenance CapEx.

11. Why Distinguish Growth CapEx from Maintenance CapEx

4:50

We distinguish Growth CapEx from Maintenance CapEx to assess the inherent capital intensity of the business and to predict future cash flow.

12. Proceeds from Sale of Asset

3:20

Proceeds from Sale of Asset are the cash payments the company receives from selling its assets.

13. Acquisitions, Net of Cash Acquired

3:44

Acquisitions, Net of Cash Acquired represents the cash the company used to purchase another company.

14. Debt Financing

3:48

Debt Financing represents the cash movements between the company and its debt investors.

15. Equity Financing

3:48

Equity Financing represents the cash movements between the company and its equity investors.

16. Effect of Exchange Rate Changes on Cash and Cash Equivalents

2:00

Effect of Exchange Rate Changes on Cash and Cash Equivalents measures the impact on the value of existing cash balance due to FX.

17. Net Change in Cash

3:12

Net Change in Cash measures how much the value of Cash and Cash Equivalents changed over the reporting period.

18. The Concept of Free Cash Flow

4:54

In this lesson, we'll learn about the concept of Free Cash Flow ("FCF").

19. The Purpose of Free Cash Flow

2:34

The purpose of Free Cash Flow is to evaluate the business quality, to determine ability to pay, and to value the company.

20. Levered Free Cash Flow (LFCF)

6:24

Levered Free Cash Flow ("LFCF") represents the amount of Free Cash Flow before accounting for interest expense and interest income.

21. Bridge to Case Study LFCF

5:00

In this video, we'll integrate everything we've learned thus far and bridge from Net Income to Levered Free Cash Flow in Excel.

22. Drivers of Levered Free Cash Flow

4:47

There are generally 3 main drivers of Levered Free Cash Flow that determine a company's ability to generate LFCF.

23. LFCF as Driver of Equity Value

2:30

The more Levered Free Cash Flow a company generates, the greater it’ll increase the Equity Value.

24. Unlevered Free Cash Flow (UFCF)

4:23

Unlevered Free Cash Flow ("UFCF") represents the amount of Free Cash Flow after accounting for interest expense and interest income.

25. Marginal Tax Rate (MTR)

2:48

Marginal Tax Rate ("MTR") is the applicable tax rate on the next dollar of taxable income change.

26. Drivers of Unlevered Free Cash Flow

2:19

There are generally 3 main drivers of Unlevered Free Cash Flow that determine a company's ability to generate UFCF.

27. Bridge to Case Study UFCF

4:01

In this lesson, we'll bridge from Adjusted EBITDA to Unlevered Free Cash Flow in Excel.

28. Free Cash Flow Conversion

3:18

Free Cash Flow Conversion is a ratio that measures the company’s ability to convert profits into free cash flow.

29. Free Cash Flow Yield

2:03

Free Cash Flow Yield measures how much FCF the company generated for investors relative to the price that investors have to pay.

30. Consistency of Free Cash Flow Ratios

1:10

It's important to maintain consistency when calculating Free Cash Flow ratios.

31. Connecting Dots

2:07

In this lesson, we'll connect what we've learned about cash flow with the big picture.