The cash flow statement and how the three statements connect
By the end of this lecture you will be able to
- Build the cash flow statement from an income statement and two balance sheets, line by line, with the indirect method
- Classify interest, dividends, taxes and lease payments under US GAAP and IFRS
- Link the three statements, prove the balance sheet balances and debug it when it does not
- Walk any change, such as $10 more depreciation, across all three statements
- Decide between capex and opex and compute free cash flow, levered and unlevered
Profit is an opinion; cash is a fact. The cash flow statement reconciles the two, and it is where the three statements lock together. Master this lecture and you will answer the most common accounting question in banking interviews without hesitation.
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