Calculate Netflix Inc. [NFLX] cash flow ratios as presented below. Demonstrate your calculations in your post,...
Calculate Netflix Inc. [NFLX] cash flow ratios as presented below. Demonstrate your calculations in your post, and explain what the cash flow ratios indicate about the company.
- Start with net income for the period, found on the income statement.
- Adjust net income for non-cash expenses (typically depreciation and amortization). Since depreciation and amortization expenses decrease net income, but do not use cash, they are added back to net income in the conversion.
- Add back losses or subtract out gains that resulted from investing activities. Gains and losses will be included in the investing activities section of the statement of cash flows, and are factored out of the operating activities section.
- Adjust for changes in each of the individual current assets (other than cash and short-term investments), which reflect differences in the timing of accrual basis net income and cash flows. All increases in the identified current assets are included in the conversion by decreasing cash flows, and all decreases in the identified current assets are reflected by increasing cash flows.
- Adjust for changes in each of the current liabilities (other than short-term debt to financial institutions and current maturities of long-term debt, which relate to financing), which reflect differences in the timing of accrual basis net income and cash flows. All increases in the identified current liabilities are included in the conversion by increasing cash flows, and all decreases in the identified current liabilities are reflected by decreasing cash flows.
- The sum of the net income, depreciation and amortization adjustment, gain and loss adjustment, adjustments for changes in current assets, and adjustments for changes in current liabilities, will result in the cash flows from operating activities for the period.
Homework Answers
Answer.
cash flow statement shows the cash movements from 3 main activities 1. OPERATING 2. INVESTING & 3 FINANCING
OPERATING ACTIVITIES shows cash inflow or out flow related to firm's operations .
INVESTING ACTIVITIES shows cash inflows or outflow related to investment made by the firm
FINANCING ACTIVITIES shows cash inflows or outflows related to financing activities
The method suggested in above question is indirect method in which proceed from
NET INCOME OF THE FIRM AND WE DO ADD / LESS ITEMS
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