Two methods calculating CFO

1. Two methods calculating CFO

1. Direct method (encouraged as more explicit, but more complicated):

1. Start from Revenue — get CFO
2. 通过“一收四支” — (1) Cash received from customers(main bussiness) (2) Cashed paid to suppliers (3) Cash paid to employees (4) Interest paid (5) Taxes paid。来求得各项的 +Cash received，和 -Cash paid
3. Eq1: Delta A/R = Net sales - Cash received
4. Eq2: Delta A/P = Purchase - Cash paid. Delta Inventory = Purchase - COGS
5. Eq3: Delta Wage payable = Wage expense - Cash paid
6. Eq4: Dealta interest payable = Interest expense - Cash paid
7. Eq5: Delata tax payable = Tax expense - Cash paid

2. Indirect method:

• Income statement (利润表)
  1. Start from Net Income — get CFO
  2. +- Non-cash losses/gain — Depreciation
  3. +- Non operating items — transaction of lands etcs
• Balance sheet (资产负债表)
  1. • Delta current assets — Accuont receivable, Inventory
  2. • Delta current liability — Account payable, Tax payable

2. Equation

1. Direct method (encouraged):

1. Start from Revenue — get CFO