沃顿商学院全套笔记-二十二-
沃顿商学院全套笔记（二十二）
沃顿商学院《商务基础》｜Business Foundations Specialization｜（中英字幕） - P69：21_3 3 1 更多现金流主题和 EBITDA.zh_en - GPT中英字幕课程资源 - BV1R34y1c74c
Hello， I'm Professor Brian Boucher。 Welcome back。 In this video。
we're going to tackle a number of miscellaneous cash flow topics that I haven't， gotten to yet。
First we'll talk about how to treat a gain or loss on sale of profit-print equipment。
on the cash flow statement。 Then we'll talk about some complications in how things are classified on the statement。
of cash flows。 And we'll wrap up with a discussion of earnings versus cash flow versus EBITDA versus free。
cash flows。 It's a big agenda， so let's get to it。 First。
let's look at an example of how to treat a gain on sale of profit-print and equipment。
under the indirect method cash flow statement。
So let's say we sold property-plant equipment worth $70 on the books for $75 cash。
How are we able to sew PPE for more than it is worth？
I bet that never ever happens in the real world。 We're correct that we can't really sell something for more than it's worth because what somebody。
pays for it is essentially what the asset is worth。
But I said how much it's worth on the books or the financial statements。 And remember。
the book value of property-plant equipment is going to be a function of our。
depreciation assumptions because it equals the original cost minus the accumulated depreciation。
So if the depreciation assumptions are incorrect， which they always are， then we're going to。
end up selling it for more or less than it's on the books。 So they give it this way。
If we depreciate something too much， we drop its value too much， we end up having a gain， on sale。
which sort of brings it to the true amount of depreciation over the life of the， asset。
If we depreciate something too little， then we'll have a loss on sale， which again gets。
us to the true level of depreciation on the asset over its life。
So this gain or loss on sale helps us adjust our incorrect assumptions and get the true。
amount of economic depreciation over the life of the asset。 Anyway。
that's going to result in a gain of $5， which will go on the income statement。
Excuse me， does this $5 gain count as revenue？ Excellent question。
Although this gain will go on the income statement and increase the income just like revenue， would。
we're not going to consider a top-line revenue because it's not part of our core。
business activities。 In other words， we're not in the business of buying and selling buildings。
On an application of this example， it's because it's not a core business activity， it's going。
to be an investing activity， and because it's an investing activity， we need to remove that。
gain out of the operating section and place it into the investing section。
So we're going to consider all $75 of cash that we receive as an investing activity。
which is another indication that we don't treat this as a revenue activity because if。
it was， it would be part of operating cash flow。 So I'm going to bring back one of the basic examples we did early on where we have all。
of our sales in cash， all of our cost of goods sold in cash， and then depreciation of。
$10。
We're going to add to that the gain on sale of property plant equipment， which goes on。
the income statement， which would make our net income 35。
Under the direct method cash flow， all of our sales were cash， so we have collections。
from customers of 100。
All of our cost of goods sold was in cash， so we have payments as suppliers of 60。
Depreciation of course is not cash， and the gain on sale of property plant equipment。
we want to consider that part of the investing cash flow。
So we ignore that and we end up with operating cash flow of 40， and then we have investing。
cash flow as the full $75 proceeds from sale of PPE。
Under the indirect method， we start with net income， which is 35。
We add back depreciation expense of 10 because it's a non-cash expense， and then we have。
to remove the gain， otherwise we'll double count that cash flow。
Again increases net income， so to remove it we need to subtract the gain。
Once we do that， we end up with operating cash flow of 40， so it's the same under the。
indirect and direct method， and then we have again the full cash flow from the sale of。
the PPE 75 as an investing cash flow。
I believe that some students could be confused by this example。
Could you provide the view of the handy algorithm for remembering how to adjust for such gains？
I do have a little memory device that I use when I teach this on campus， but I'm trying。
to think about whether I'm too embarrassed to put this on video。 Ah， what the heck， let's do it。
So the way to remember how to deal with gains and losses on investing activities in the。
operating section is the hokey-pokey。
I don't know if you remember this little song and dance， but it goes something like this。
You put the gain in， you take the gain out， you put the gain in， and you shake it all。
about， you do the hokey-pokey and you turn yourself around。
That's what it's all about。
Next， I want to talk about some of the complications that you may run into when looking at a statement。
of cash flows。 These are not things that we're going to explicitly cover in the course。
but I want you。
to be aware of them because you will run into them in practice。
And all these complications surround the question， why doesn't the change in the balance sheet。
numbers often equal the number on the statement of cash flows？
So in all the examples that we've done so far， when you look at the change in the balance。
sheet numbers for， say， accounts receivable， it's the exact same number that you see in。
the operating section on the statement of cash flows。
But in real financial statements， you often see it's not the case for one of these four。
reasons。 First， there could be non-cash investing and financing activities that relate to the working。
capital accounts in the operating section。
An example would be， let's say one of our customers who owes us an account receivable。
can't pay us cash， so instead they give us a piece of land。 Well。
that would be a non-cash transaction。
It would be disclosed at the bottom of the statement of cash flows。
It would also affect the balance sheet number for accounts receivable， but it wouldn't show。
up on the cash flow statement because there's no cash involved。
A more common example would be acquisitions or divestitures of businesses。
All the cash that companies pay when they acquire another company is considered an investing。
cash flow。 But part of the things that companies acquire are working capital assets and liabilities。
So for instance， let's say a company made an acquisition， part of the acquisition they。
acquired some accounts receivable。
As accounts receivable would show up on the balance sheet， but would not be part of the。
number in the operating section because we want to call that cash flow and invest in。
cash flow and we don't want to double count it， so we break it out。
Third， there are foreign currency translation adjustments。
For multinational companies， which have subsidiaries in multiple countries and different currencies。
what we do is we take any effect of exchange rate movements and break them out of the operating。
section of the cash flow showing them at the bottom。
So a foreign exchange rate movement would affect the balance of say accounts receivable。
or inventory in the balance sheet， but we wouldn't show it in the operating section。
of the statement of cash flows。 Foreign currency， what's。
does anyone even do these in the real world？ Do you mean the MTV show the real world or in practice？
Because we're talking about the MTV show the real world。
I don't think they did any foreign currency translation adjustments。
It seems more like a Jersey shore thing。 Anyway， this is a pretty advanced topic。
It's something I cover in a second year elective， so we're not going to go into this in detail。
in this course。 I just wanted you to be aware of the fact that all of the effects of exchange rate movements。
on the cash flow statement are broken out on one line item in the bottom so that when。
you look at the operating section what you're seeing are changes and accounts due to real。
activities not due to exchange rate movements。
The last complication is that sometimes companies have subsidiaries in different industries which。
affect what is considered operating versus investing activities。
So let's think back to our company before that made the pills to cure gray hair。
Not that gray hair needs to be cured。 Let's say this company goes out and buys a real estate subsidiary。
What would happen then is the pharmaceutical company buys land。
It would be considered an investing activity but if the real estate subsidiary buys land。
it would be considered an operating activity because that's part of their core operations。
So the same transaction of buying land could show up as either operating or investing。
Now companies in this situation will sometimes produce separate cash flow statements to help。
investors see these different activities match up in the different subsidiaries。
First I want to talk about disagreements that analysts and investors have over the FASB classification。
a couple items。 I know it's hard to believe that people would disagree with the FASB but there are a couple。
disagreements out there。
The first many investors and analysts prefer to classify interest payments as a financing。
activity and interest and dividends received on an investment as an investing activity。
Under IFRS a company could put those activities in the different buckets but remember under。
US GAAP you're required to call those operating。 So one thing the FASB did is they required a disclosure of cash paid for interest so。
if investors or analysts want to take it out of operating they can easily subtract it because。
that disclosure is provided。
Another disagreement is that all income tax effects are shown in the operating section。
even if the income relates to financing or investing activities。
So if there's an income tax effect from getting say again on selling property plant equipment。
which would be an investing activity the tax effects show up as operating。
So the FASB requires that all cash taxes paid must be disclosed。
Again so if you don't think that cash taxes should be part of operating you can take them。
all out in your calculation。 Next I want to talk about this measure EBITDA which is defined as earnings before interest。
taxes depreciation and amortization。
EBITDA is often used by investors and analysts as a proxy for operating cash flow and because。
it excludes interest in taxes it solves for that problem that we talked about on the last。
slide。
However EBITDA does not do a good job of measuring cash flow if there are large changes in working。
capital like accounts receivable or inventory and in fact it suffers from the same manipulation。
potential as net income。 For example let's think of a company that does channel stuffing。
Channel stuffing is a situation where at the end of a quarter the company is trying to。
meet an earnings target so they ship a bunch of product to customers in order to book the。
revenue which would then increase earnings and of course then increase EBITDA。
But there's no cash that's collected that customers haven't paid us yet instead accounts。
receivable go up。 So EBITDA would consider this channel stuffing as a cash flow but it's not a cash flow。
Now if we took EBITDA and adjusted for this increase in accounts receivable then we would。
have a good measure of cash flow and I'm going to talk about this more in the next video。
I believe this is not correct。 Everyone knows that EBITDA is the best measure of cash。
Now I feel pretty strongly that EBITDA is not a good measure of cash flow because unless。
you adjust for these changes in working capital then EBITDA is just as easy to manipulate as。
earnings is。 What we're going to do in the next video is a case where we'll highlight some of these。
drawbacks of EBITDA and I'll show you when it's not a great measure of cash flow。
And then one more point on this。 You often hear people talking about cash is king implying that you should only look at。
cash from operations or EBITDA as a proxy for cash from operations and not even look。
at earnings because it's too easy to manipulate。
Well there's actually been a lot of academic research that's looked at this question of。
earnings versus cash flow and it finds that earnings are a better predictor of future cash。
flows than current cash flow from operations。 The reason is that earnings is trying to measure the creation of value。
It's trying to answer the question are you able to price your product or service high。
enough to cover all the costs of doing business。 If so you tend to get high cash flows in the future even if it turns out you don't happen。
to have a high cash flows this period。 Whereas cash from operations can be much more susceptible to timing effects which is something。
we'll look at in the next video。 But the good news is you don't have to choose one or the other。
You get both earnings and cash flow from operations and academic research is very clear that if。
you put both measures in together you get the best predictions of how a company is going。
to do in the future in terms of its future cash flows。
I bet that accounting professors did the research to show that earnings is better than cash flow。
Is that truly the case in the real world？ Yes it was mostly accounting researchers that did this research but is there anything wrong。
with that？ The data that they looked at though came from real companies looking at long time series。
of data from 1962 to the present and it's a very robust result that earnings are a better。
predictor of future cash flows than current cash flows but again the research emphasizes。
the best prediction comes from including both measures together。
The last topic of this video is that I want to briefly talk about free cash flow。
This is more of a finance topic where they use free cash flow a lot but since we've been。
talking about cash flows and these finance approaches generally pull cash flow numbers。
out of the finance statements I wanted to briefly give you some cautions that you should。
have in dealing with free cash flows。 People talk about free cash flow they generally mean operating cash flow minus cash used for。
long term investments。
There's valuation models out there that show if you forecast out a company's free cash flows。
discount them back to present value you'll get a measure of how much the company should。
be worth what its stock price should be。 The problem is that if you look across these measures of free cash flow there's often。
no standard measure for operating cash flow。
So I've got a number of accounting and finance textbooks lying around my office and they all。
seem to define operating cash flows differently。 One book defines it as cash from operations before interest expense so using the FASB number。
and then adjusting for interest expense。
Another defines it as no-plat which is net operating profits less to just a taxes which。
would be EBITDA minus cash tax on EBITDA which is not a good measure of cash flow because。
it doesn't measure cash without changes in working capital you won't get a measure of。
cash。 The next one no-pat minus increases in working capital is a better measure no-pat is net。
income adding back interest expense and then adjusting for changes in working capital to。
get closer to cash flow。
Another book called it net income adjusted for depreciation and other non-tax non-cash。
items minus an increase in working capital which I guess would be okay as long as the depreciation。
was after tax because net income is after tax。
Another said gross up earnings before interest in taxes and had depreciation and a lot of。
them just say EBITDA without defining what it is。
On top of this another problem you'll encounter is companies will offer disclose free cash。
flows using their own custom definition and what you'll find is that definition often。
changes across companies or companies will change it across years so if you're using。
any kind of cash flow measure the most important thing is to figure out how it's actually defined。
because some of these measures are defined much better than others。
I believe a better approach than telling us everyone is wrong would be telling us what， is correct。
I'm not saying everyone is wrong I'm just saying some people are more correct than others。
I think there's two approaches that would give you a really good cash flow from operations， number。
The first approach would be to take the cash from operations from the cash flow statement。
which uses the FASV classification and then subtract out cash paid for interest and cash。
paid for taxes which are disclosed somewhere else in the report。
The second way would be to start with EBITDA and then adjust for these changes in working。
capital like receivables inventories and payables using the balance sheet equation like we do。
under the indirect method。 In the next video we'll look at a case which will better highlight some of these advantages。
and disadvantages of these different measures for cash from operations。
So I know that was a lot to throw at you in one video。
What we're going to do in the next video is look at a couple examples which will give。
us more practice on putting together cash flow statements under the indirect method。
It'll give us some practice on handling gains and losses on sale a property plan equipment。
in the cash flow statement and it will allow us to continue our discussion of earnings。
versus cash flow versus EBITDA。 I'll see you then。 I believe that we will see you next video。 。 。
[BLANK_AUDIO]。
沃顿商学院《商务基础》｜Business Foundations Specialization｜（中英字幕） - P7：6_体验品牌.zh_en - GPT中英字幕课程资源 - BV1R34y1c74c
So in this last segment， we're really defining what a brand is。
We talked about what marketing is。 We've talked about marketing strategy， competitive analysis。
customer value。 We talked about the idea of segmentation targeting and positioning。 And the core。
core concept of a good strong brand， which is brand positioning。
And brand positioning that's so sharp that you can define it in just three words in。
30 seconds as a brand mantra。 That's kind of where we've gone。
right down to a sliver of a sharp definition of what， brand is。 And in this last piece of this。
I want to talk about the notion of experiential brand。 When I talked about what is marketing。
and we talked about things changing from seller's。
market to a buyer's market to the connected community， in the connected community， that's。
when this notion of customer experience comes in。 And brands like just general markets and customers' experiences also have become very experiential。
So it's not enough to justify a brand in terms of a crisp， clear brand mantra and a， crisp。
clear brand positioning。 But you also have to define all of the experience that exists around the brand。
What's the smell of the brand？ What's the feel of the brand？
All sorts of other things now become part of what the brand is in this new experiential。
world that we live in。 So what's an experience？ An experience is a process that occurs as a result of living through a situation。
undergoing， that situation。 So it's not just a moment in time。
It's a dynamic notion where you sense or feel this experience。 I'm going to define it later。
You'll see that it involves all the senses。 It's social， it's behavioral， it's cognitive。
it's emotional。 It's stimulations that are triggered to the sense that you think about。
that you feel。
They connect the company and the brand to the customer and they place the customer action。
and the individual's actions and personal occasions in a broader social context。
So the experience includes all of these kinds of things。
What I've been talking about up to this point really is pretty rational。
And here's where we bring in the emotions and all these other things。
And I know those of you who know and love brands really understand that brands are emotional。
they're experiential。 They're not just this hard and fast cognitive point of view。
And so that's what I'm emphasizing here on the point I want to end with in this section。
that a brand is an experience。 And so the things on the left are important。
I'm going to talk about those， but they all have to be augmented to be bigger than that。
and to embody this experience or emotional piece。 So we talked about differentiation。
That's a principle of marketing to be differentiated， the point of difference。
But now in today's brand， these rich brands are not just differentiated， they're experientially。
differentiated。 So the differentiation is also in the brand experience。
It's not just a single promise， it's a relationship。 You feel towards a brand。
the brands that you just love， if you're an apple lover or。
you're an Abercrombie lover or something， you have a relationship with that brand。
It's over time and it defines you。 It's not just brand attributes。
these cognitive that or these performance attributes or these， product attributes。
It's a personality。 You think of a brand almost as a friend。 It's not static， it's dynamic。
It's not a mass brand because you're co-creating with the brand。
The brand becomes very individualized， becomes very relevant to you。
You're not just aware of this brand， you're aware of how this brand fits into your life。
So you can see by the types of words that I'm saying that really， really strong brands。
embody all of this emotional experience。 And so when you define these terms。
these things that I've mentioned earlier and you， don't just think about brand positioning。
You think about experiential brand positioning。 So what does the brand stand for？
And it should be a multi-sensory strategy。 When you think about brand positioning。
experiential brand positioning， you not only want to think， about what the DNA is。
what the brand mantra is， you want to think， what's the smell of， the brand？
What's the color of the brand？ What's the emotion you feel when you think about the brand？
That's a brand positioning and experiential brand positioning。 And it needs to be。
as any kind of differentiation is， it needs to be distinct from everybody， else's。
so you don't want， all hotels don't smell the same， all soaps don't smell the， same。
They have different experiences。 And then the brand promised， the mantra， again。
it's not just three words， you know， cognitive words。
It also needs to describe what that brand promise is in experiential terms。
And here's where I'm going to be very clear of what I mean by experiential。 It needs to have senses。
so it needs to be what's the vision of it， what does it look， like， what does it smell like。
Maybe what does it taste like， what does it sound like。 Is there music associated with it。
what does it feel like， what are the senses。 And then when I say feel here， what I mean is emotions。
How do you feel about it？ Is it a happy brand？ Is it a sad brand？ Is it a tragic brand？
What are the emotions you feel with this brand？ What do you think about it？
And that's what we've been talking about。 How does it make you behave or act？
And relate refers to the social environment。 What people， what social context。
what culture do you consider or do you put this brand in？
And all this experiential aspect of the brand should be in all channels。
All channels should have an experiential component to it。 So just to go over those again。
the sensuous is across the five senses。 You wouldn't have a consistent experience。
The feel part are the emotions。 You should appeal to the customer's inner feelings and build strong emotions to it。
The cognitive is the intellect， the thought process， the intrigue， the surprise， whatever， it is。
the thoughts。 The behave is the way how people act around it。 It can be inspirational。
It can cause you to enact a certain way。 And social is the part of the social system。
the culture that surrounds the brand。 And you want to have these experiential functions delivered through the four P's。
We're back to the four P's。 The product， the place， the promotion。 Only now and the price even。
And now we're going to define each one of these four P's in experiential ways。
So let me just give you examples。 All of you know about， I'm sure you've seen a self-designed。
customized Nike。 It's not just a product that you're in but anymore。
It's a shoe that you can co-design， co-create。 You're part of the process that makes it very experiential。
You choose what you want in your shoes。 You choose what you want in your greeting cards。
Like I said， millennials are very much thinking like this。 They should be part of。
They should co-create the product。 That's an experiential notion of a product。
Advertising that's experiential， I think one of the ones who was a beginner really understood。
this was Apple。 When Apple would show their iPod when they were first coming out。
it was a very experiential， ad。 It was music。 It was dance。 It was， you know， you felt it。
The little white earbuds that came through was a color， was a design。 So you can see advertising。
This is traditional advertising。 The online advertising， mobile advertising is very experiential。
very interactive now。 I think that's what most people are now just assuming most advertising is that way。
When you're watching ads on the Super Bowl， you have your second screen there and you're。
interacting with it， that's very experiential。 What does it mean to experience price？ Well。
eBay certainly showed us that。 You know， with auctions。
Sometimes people will give you a bag and say anything you can put in this bag， you'll， save 20%。
And it makes price something that you're creating。
I'm not deciding what you're going to save 20% on。 You decide what fits in the bag。
Or even the concept of priceline。com where you kind of name your own price。
That's very much an experiential notion around price。 Even something as cognitive as price。
which is numbers， can be experiential。
And finally， channels。 You're seeing stores。 You're seeing online become very experiential。
These beautiful flagship stores， if any of you've seen Ralph Lauren's Mansion in New York。
City or in Paris or in Milan。 These are stores where in Ralph Lauren， for example。
they build an entire house， the entire， lifestyle。 People who wear Ralph Lauren clothes。
what kind of house would they live in？ What kind of furniture would they have？ And it's very。
very experiential。 Not just a store with clothes on a rack。 There's stores in the experience。
in the context that you're going to live and wear them。
Sephora is another experiential store。 When you go into Sephora， there's lights， there's colors。
there's smells。
People are touching you， they're putting things on。
This is how cosmetic should be。 It's not hidden behind a counter and you can't tell anything and you've got to get a sales。
person to come and get you。 That is not experiential。 You want to go and feel the colors。
put them on， see them， smell them。
That's experiential and that's what a lot of retail is happening。
And the very best retailers understand that。 If you go to Times Square in New York。
you'll see like incredibly， incredible candy stores， that are very experiential。
There's a pop-top store。 There's an M&M store。 You go into that store and the candies are everywhere。
The colors are everywhere。 You can taste different kinds of things。 It's a lot of fun。
It's almost like an amusement park。 That's what retailing has come to be。 It's fun。
It's exciting。 It's experiential。 And that's what we're talking about。 And all of these， by the way。
are within the DNA of the brand。 This is not random experience。
This is not things that are not extremely well thought out。
Each one of these pieces is delivering to the brand mantra in an experiential way through。
these four pieces。 This is what's happening in brands。
The very best brands are brands that you understand， that you live， that you experience。
and that you tell your friends about。 They're brands。
Some people think about these new kinds of experiential brands as religion。
It's like a religious experience。 And we certainly saw that when Steve Jobs passed away。
People went to the Apple Store and put flowers in front of the Apple Store。 That was his church。
That was a memorial。 These things， brands have taken on very new meanings， these global brands。
in today's world。
And so， just as a conclusion to this whole section， wrapping up everything I said， if。
you've got a strong brand， a strong brand makes clear promises。
Clarity is very important and it has to be dynamic。 These promises have to be kept over time。
You have rich， unique brand equity， strong emotions， strong thoughts with it。
And they're delivered dependably and consistently。
And strong brands have really loyal customers who help spread the brand message。
Weak brands on the other hand are vague。 They changed。 You never know what they're going to do。
There's no consistency。 There's no commitment。 There's no， it's a very spotty reputation。
There's doubt about it。 You never know what it is。 Pricing can change。 You know。
one time it looks like this， another time it's shoddy quality。 Those are not strong brands。
Consistent clear promises are what make very strong brands。 The other character's great brands。
as I said， is consistency。 Every time you get a product experience under this brand name。
it's the same。 You expect it。 It meets your expectations。 Very important。
Branded products tend to be superior products。 You're not just delivering a lukewarm tea。
You're delivering something that meets specific customer value。 It's distinctive。
A strong brand doesn't melt into another brand。 There's a very big difference between Disney and McDonald's。
You don't get them confused。 You don't get Coke and Pepsi confused。 They are very。
very distinct brand positioning and distinct customer experiences， even if。
the product itself might be somewhat similar。 Brands are aligned。
What is shown externally is aligned internally in the organization。
When you have a market leadership strategy， it not only indicates what your marketing strategy。
should be going forward， but it indicates what kind of organization you're going to have。
what the priority of your resources are going to be， how you allocate those resources， etc。
And it's very important， and we'll talk about this in the last section， for your brand to。
stay relevant。 Markets change， times change， customers change。
A great brand is flexible and adaptable and changes with the customers。
[MUSIC]。
沃顿商学院《商务基础》｜Business Foundations Specialization｜（中英字幕） - P70：22_3 3 2 现金流量与 EBITDA 示例.zh_en - GPT中英字幕课程资源 - BV1R34y1c74c
Hello and Professor Brian Buchay， welcome back。 In this video。
we're going to look at a couple of made-up companies， Purple and Green。
which have very different net incomes， but exactly the same cash flow。
It will give us some more practice at putting together cash flow statements under the indirect method。
But more importantly， it will allow us to talk more about the differences between net income and cash flow。
and it will give us some practice in doing a complete analysis of a statement of cash flows。
Let's get started。 To put together cash flow statements for Purple Incorporated and Green Company。
we of course have to start with net income。
So here are the income statements for both Purple and Green。
We can see that Purple has 150，000 of net income， Green has 50，000。
So when we start on the statement of cash flows， that's going to be the top line。
the net income for Purple and the net income for Green。
Now the next step in putting together the cash flow statements for these two companies would be to look for non-cash charges like depreciation。
If we go back to the income statement， you don't see depreciation anywhere here。
That's because it's lumped in with cost of goods sold。
So what I'm going to do is give you some additional information that you'll need to solve this problem。
And the first piece of additional information is the depreciation for the two companies。
So Purple had 50，000 of depreciation included in cost of goods sold。
Green had 100，000 of depreciation included in cost of goods sold。
Under the indirect method， we add those two back。 They're non-cash expenses， so to remove them。
we have to add them back。
Now there's actually another non-cash expense for at least one of these companies。
and that's an expense due to restructuring。
So Purple had no restructuring activity in 2012。
Green recognized the 75，000 liability due to restructuring in 2012。
but did not pay any cash on that liability during the year。
Excuse me。 What is this restructuring liability？ Why is an expense recognized before any cash is paid？
This is the conservatism principle in action。 So we talked about this in prior videos。
but the conservatism principle says that when a company anticipates future losses。
they have to recognize an expense for them today。 So in this case， Green has decided to restructure。
They have a restructuring plan which will involve laying off employees and incurring employee severance costs。
closing facilities and incurring facility closing costs。
and they have to recognize an expense for the total amount of those estimated cash costs today。
and then create a liability that will represent the obligation to pay those cash costs in the future。
To reinforce this point， let's take a look at the journal entry Green would make when they record this restructuring liability。
They debit restructuring expense for 75，000。
That represents the amount of expected future cash flows they're going to spend in the restructuring。
which they're required to recognize an expense in the year they make the decision to restructure。
They credit the restructuring liability for 75，000。
which of course is the obligation to pay that cash in the future。
Notice there's no debit or credit to cash here， so this is a transaction that has no cash impact。
So we treat the restructuring charge like depreciation。 It's a non-cash expense。
so to remove the non-cash expense we add it back to get from net income to cash from operations。
Next， both companies had proceeds from selling equipment during 2012。
Purple sold equipment for $30，000， which included a $10。
000 gain over the book value of the equipment。
Green sold equipment for $50，000， which included a $20。
000 loss over the book value of the equipment。
Now I'm going to show you the journal entries here just to make clear how this works。
We're going to revisit this topic later in the course。
So what Purple would have done is debit cash for $30。
000 because that's how much cash they're receiving。
They have a gain on the sale， which is a credit。 It's like a revenue。
It increases net income and increases stockholders' equity， so you credit gain on sale for $10，000。
And then they would credit net property plan and equipment to take the PP&E off the books at its current book value。
What is an "P。P。&E" account？ Do they even have these in the real world？ No。
they don't have net PP&E accounts in the real world。
I'm just using this as a simplification for now。 In the real journal entry。
what you have to do is credit the building account for the original cost of the building。
and debit the accumulated depreciation account for all the depreciation that's accumulated so far in the building。
We'll see that journal entry in a couple weeks， but for now I'm trying to keep things simple。
so I created a net PP&E account。 Sorry。 Now let's look at the journal entry for green。
They would debit cash for $50，000 because they're receiving $50，000 cash。 They debit loss on sale。
The loss is just like an expense。
It reduces net income， reduces stockholders' equity。
So that leaves us with a credit to net property plan equipment。
The original book value of the equipment that was sold was $70，000。 We only got $50，000 cash。
which is why we got a loss of $20，000。
Now going to the statement of cash flows， what we want to do is take those two debits to cash。
the $30，000 and the $50，000。
and show them under investing activities as proceeds from sale of equipment。
But then to avoid double counting， we need to remove the gains and losses from the operating section。
So for purple， they had a gain of $10，000。
We subtract that gain to remove it from net income to get to cash from operations。
For green， they had a loss。 We need to add that loss back to remove it from net income to get to cash from operations。
By taking out the gains and the losses， we avoid double counting the cash flow and operating。
We've already recognized that cash flow in investing。
I believe the viewers would be more entertained right now if you did the Okey POTY again。 I suppose。
here it goes， for purple， you put the gain in， you take the gain out， you put the gain in。
and you shake it all about。
You do the Hokey Pokey and you turn yourself around。 That's what it's all about。
Now for green， you put the loss in， you take the loss out， you put the loss in。
and you shake it all about。
You do the Hokey and you turn yourself around。 That's what it's all about。
Next item， both purple and green spent cash flow on capital expenditures buying things like property plant equipment。
Purple had 220，000 of CapEx。 Green had 70，000 of CapEx。
So we know that CapEx is an investing， or is it CapEx are an invest in activities。
CapEx is or CapEx are。
You Americans have no idea how to use the correct verb tense。
You say England is eliminated from the World Cup， when everyone knows the correct version is。
England are eliminated from the World Cup。 Please move on。 Okay。 Anyway。
we put a line in the cash from investing activity section where we show the capital expenditures for both purple and green。
Next we have a number of financing activities that two companies did during 2012。
Purple received $50，000 proceeds from issuing long-term debt。
They made $35，000 of payments on their long-term debt， and they didn't pay any dividends。
Green did not issue any new debt。 They paid back $95，000 of their existing long-term debt。
and they paid $60，000 of dividends to their shareholders。
These are all financing activities。 So in the statement of cash flows。
we just put a line item for each activity to show the proceeds and payment of long-term debt。
and the dividends paid for the two companies。
So now we're done with the investing and financing sections of the statement of cash flows。
So we're going to go back and work on the rest of the operating section。
I'll give you the changes in the working capital accounts。
and we'll go ahead and put those in the cash flow statement。
So for accounts receivable， purple had an increase of $100，000 during 2012。
whereas green had a decrease in accounts receivable of $100，000。
So to know whether to add or subtract these， we need to use the balance sheet equation。
cash plus NCA equals liabilities plus Docklars' equity。
Excuse me。 What is NCA？ Sorry， NCA stands for non-cash assets。 Starting with purple。
their accounts receivable went up， so that's an increase in a non-cash asset。
which means we have to subtract it on the cash flow statement。
The intuition here is that they made more credit sales than they had cash collections。
so they're booked some revenue that was non-cash， and we have to subtract out the increase in accounts receivable as the non-cash portion。
For green， their accounts receivable went down by $100，000。 It's a non-cash asset going down。
so we add that back on the cash flow statement。
The intuition here is that their cash collections were greater than their new sales。
which must mean that they were collecting based on prior sales in addition to whatever they collected this period。
Next， purple had an increase in inventory of $50，000。 Green had a decrease in inventory of $50，000。
So starting with purple， inventory goes up， non-cash asset goes up。
we subtract that on the cash flow statement。
What must have happened here is purple bought more inventory than they sold with the amount of inventory they sold represented in net income。
For green， their inventory went down， so that's a non-cash asset going down。
We add that back on the cash flow statement to stay in balance。
and what this means is that green actually sold more inventory than they purchased。
So not only did they sell whatever they had this year。
but they tapped into the inventory at the beginning of the year and sold some of that as well。
So that's an extra source of cash flow by selling the inventory from the prior period。
Purple had prepaid expenses， which decreased by $100，000。 Green's prepaid expenses increased by $25。
000 during 2012。
So for purple， prepaid expenses go down and non-cash asset goes down。
we add that on the cash flow statement。
For green， non-cash asset goes up by $25，000 as prepaid expenses increase。
we subtract that on the cash flow statement。
For accounts payable， purple had an increase of $75，000 in 2012。 Green had a decrease of $75。
000 in 2012。
Now we're on the other side of the equal sign， so for purple， accounts payable goes up。
That means liability goes up by $75，000。 So we have to add that to the cash flow statement to stay in balance。
Intuition here is that if your accounts payable are going up。
that's money that you're not paying to your suppliers， which is a source of cash。
For green， their accounts payable went down， their liabilities went down。
and so we have to subtract that on the cash flow statement to stay in balance。
What happened here is green actually paid more cash to their suppliers than they acquired new inventory on account。
and that actually makes sense because we actually saw their inventory reduce。
so those two often go together。
Inventory as a source of cash is often accompanied by accounts receivable as a use of cash as you're paying off more creditors than you're adding in new accounts payable。
Finally， for interest payable， purple had an increase of $10，000 in 2012。
Green had a decrease of $70，000 in 2012。
So for purple， we have an increase in interest payable as an increase in liabilities。
so we add that to the cash flow statement。
For green， we had liabilities go down by $70，000 as interest payable dropped。
We subtract that on the cash flow statement。
And once all is said and done， and we add everything up。
it turns out that purple and green have exactly the same cash from operations of $225，000。
So these companies have the same cash flow， but purple has three times the earnings as green。
What do we make of this？ Does this happen in the real world？ Yes， in fact。
I think it happened in episode four of the real world Honolulu。
but maybe I'm not remembering that correctly。 Anyway。
I'm going to go through now and do a detailed analysis。
and we'll talk about why these two numbers can be so different。
Now that we've put them together， let's take a look at these two cash flow statements in detail to see what we can learn by analyzing them。
First， for purple， we see a nice big cash from operations of $220，000。
most of which they're reinvesting in long-term assets。
We see they have capital expenditures of $220，000。
Their net cash from financing is slightly positive because for some reason they decided to run up their cash balance by $50。
000。
But this profile overall looks sort of like a growth maybe into a mature stage where you've got healthy cash from operations。
but most of it is being reinvested back into the business through cash for investing activities。
Now let's take a look at green。 Green had the same high cash from operations of $225，000。
but they're investing almost nothing in long-term assets。
Their capital expenditures were only $70，000， and they sold $50。
000 worth of equipment during the year。
So what are they doing with all that cash they're not investing？
They're actually paying off financing and paying dividends。
So we see a big negative cash from financing activities。
They're not borrowing anything new。 They're paying off a lot of long-term debt。
and they're paying dividends to their shareholders。
This is typical of a late-mature and decline stage company where the investments aren't there。
so they're taking the excess cash flow and paying off debt and returning it to shareholders through dividends。
Next， I want to take a look at the operating sections in more detail for these two companies。
Starting on the top line we have net income， and we see that purple has three times as much net income as green even though their cash operations are the same。
So is purple three times better than green， or are they the same company？ Well。
we can learn what's going on with this discrepancy by looking at everything between net income and cash from operations。
so all the things that cause them to be different。
The first big difference is depreciation。 Green has much more depreciation than purple。
Now one way that we can try to understand what this means is to compare depreciation and capital expenditures。
If you think of depreciation as using up old equipment。
whereas capital expenditures is buying new equipment。
it's an interesting comparison to look at the relative magnitudes。
So for purple they have 50，000 of depreciation， but 220，000 of CapEx。
indicating that they're growing dramatically。
They're investing a lot more in new equipment than they're using up old equipment。
When we look at green we see 100，000 of depreciation and only 70，000 of CapEx。
so green is not even investing enough to replace its existing use of equipment。
So that would indicate that green does not have a lot of good growth prospects。
The next big discrepancy is the restructuring charge， which green ended up taking during the year。
That's a non-cash charge， so it caused net income to go down。
but did not affect cash from operations。
In fact it's one of the big reasons why green had much less net income。
But it's also an indication of bad news， because the restructuring charge is an estimate of all of the future cash flows that green will have to pay to lay off employees。
pay employee severances， close facilities and things like that。
So what net income does is they pull all those future charges into the present with an expense。
whereas the cashless statement will only show those future cash payments as they happen down the road。
Finally we can look at all of the changes in working capital。
So for purple we see negative effects of change in accounts receivable and inventory。
which means those two accounts are growing。
Change in accounts payable is positive， which also means it's growing。
So this indicates that purple's business is growing substantially in terms of their working capital。
When we look at green， we see that accounts receivable and inventory was a source of cash。
because they've been liquidating or reducing their accounts receivable and inventory。
Their payables have also been going down。
And so this profile is again consistent with a company that doesn't have a lot of growth and may actually be reducing its size。
So putting it all together， it turns out that these movements in working capital due to the different growth stages happen to make the cash from operations the same this period。
But purple looks like it's the much better bet long term because it's throwing off a lot more net income and it doesn't have to do this restructuring down the road。
Last， I want to look at EBITDA for these two companies。
Remember EBITDA is earnings before interest， taxes and depreciation and amortization。
And what we see from the EBITDA is that purple has much higher EBITDA than green。
which means that EBITDA is really not picking up cash flow。
Because what we just saw in the cash flow statement was that the cash from operations was identical between these two companies。
Now of course if you think back to the cash flow statement。
one of the things that green had was a restructuring charge。
which is a non-cash charge like depreciation that needs to get added back。
So if we add back the restructuring charge so that we get EBITDA without the restructuring。
now the two numbers are closer。
Also if we go back to the cash flow statement， they had different losses and gains on sales of assets。
That's part of earnings but it should be an investing cash flow so we need to take that out as well。
So why don't we adjust for the gains and losses on asset sales and when we do that。
then we get EBITDA that's identical between the two companies。
Although I guess since it's EBITDA without the restructuring and the gains and losses。
we should call it EBITDAARGLE。
I believe that you simply made up the term EBITDAARGLE。 Does anyone use that term in the real world？
Excuse me， I am the real world guy。 So does anyone use the term EBITDAARGLE in the real world？
I believe we should stop asking you silly questions so you can tell us。
What is the best measure of cash flow？ Yes， I did make up the term EBITDAARGLE。
Probably the only people that use that term in the real world are my former students and they probably only use it once。
get laughed at and then stop using it again。 But I want to raise the point with this EBITDAARGLE term that people often say EBITDA but they don't literally mean earnings before interest。
taxes， depreciation and amorization。 Because if there's other non-cash expenses or gains and losses from investing activities。
they'll take those out as well and still call it EBITDA。 So before you use EBITDA。
you've got to know what's in the measure。 So one more point I want to make before we wrap up the video。
We see that the EBITDAARGLE is identical between purple and green。
And we saw that the cash moparations was identical on the cash flow statement but the cash moparations was less than EBITDAARGLE。
So there's two reasons for this discrepancy。 One is that EBITDAARGLE takes out interest in taxes。
whereas the cash flow statement number includes cash taxes and cash interest。
The second discrepancy is that of course the net cash moparations adjust for changes in working capital。
whereas EBITDAARGLE doesn't。
So to get a really good cash moparations number， I would suggest one of the two following approaches。
Either calculate EBITDAARGLE and then adjust for all the changes in working capital。
or take net cash moparations， and then add back the cash interest and cash taxes to remove those two。
But you have to do one of those two approaches taking either EBITDAARGLE on its own or net cash moparations on its own is not going to give you the number you want if you're going to take this and put it into a free cash flow model。
I hope that gives you some sense of the things that you can learn by doing an analysis of the statement of cash flows。
And I hope it gives you some caution in using this EBITDAARG measure that everyone seems to like。
even though it has a lot of drawbacks。 And while， look at that。
We're already done with the week on cash flow statements。 Where has the time gone？
I'll see you next time。 See you next video。 [ Silence ]。
沃顿商学院《商务基础》｜Business Foundations Specialization｜（中英字幕） - P71：23_3 4 3M公司现金流量.zh_en - GPT中英字幕课程资源 - BV1R34y1c74c
Hello， I'm Professor Brian Buchay。 Welcome back。 In this video。
we're going to end our week looking at cash flows with a look at the。
3M company's cash flow statement。 We're going to take a look at their actual statement。
plus the supplemental disclosures， about the statement in the footnotes and the discussion of the cash flow statement in。
their management discussion analysis or MDNA section。 Let's get started。
The 3M statement of cash flows is on page 51 of their annual report。
First thing I like to look at is this breakdown of operating， investing， and。
financing activities to see what kind of stage or life cycle the company is in。
So 3M throws off about 5 billion of cash from operations every year。 It's pretty steady。
They have cash outflows from investing activities of about 2。6 billion every year。
They also have net financing cash outflows of about 2 billion other than a blip in 2011。
So this is sort of the classic mature company profile。
You've got products that are essentially cash cows。 They're just throwing off cash。
Things like Post-it Notes and Scotch tape。 Things that we can't do without。
They're still reinvesting a moderate amount back into the company back into long-term， assets。
They're more in a second。 They are net cash outflows for financing。 So they don't have to borrow。
They don't have to raise money to fund their operations or their investments anymore。 Instead。
their operations are able to fund all of their investing activities and still。
throw off some cash that they can use to pay off debt or repurchase equity or pay dividends。
So just to get some more insight into this， one thing that's often good to look at is。
comparing depreciation to purchase as a property plant equipment。 Again， it's very rough。
But if you view depreciation as using up your fixed assets， capital expenditures obviously。
is acquiring new ones。 It looks like 3M's add about replacement level。
So they are investing a lot in new PPE。 But it's sort of replacing the things that they're using up。
They do have those some active acquisitions， so about a billion or so in 2012。
And then there's a lot of activity with marketable securities。 So they bought about 5。
4 billion of marketable securities， but then they sold or had those， almost all mature within 2012。
So I think what happens is 3M is throwing off a lot of cash if they don't immediately。
have an acquisition in mind or immediately have purchased a property plant equipment。
they plow it into marketable securities and investments。
And then when those opportunities to make an acquisition or buy PPE come， they liquidate。
the marketable securities and use that to go out and make their acquisition。
So it's almost like they're serving as their own bank by buying these marketable securities。
holding their cash， getting some return， waiting until they can invest it。
And then in the financing section， we see a lot of the financing cash outflow is purchase。
of treasury stock。 That's probably for stock options。
And then there's a big dividend that they pay to shareholders， which again is another。
example oftentimes of a mature company that if you don't have a full set of investments。
that you can plow your cash back into， you may as well just pay it back to your shareholders。
and let them reinvest it somewhere。 I think you're ready to do these kinds of life cycle or growth analysis on your own。
So here's what I want you to do。 After the video's over， go on the internet。
find a firm that you're interested in， take， a look at their cash flow statement and see what you can learn by looking at the companies。
operating， investing and financing cash flows。
Now let's dig into the operating section a bit more。
So we start with net income， ignore the non-controlling interest stuff for now and just view it as。
net income。 They study growth and net income， indicating that they are consistently able to price their。
products enough to cover the cost of running the business。 And typically a mature company。
you have this steady profitability that steady profitability， turns into steady cash flows。
So very mature， well-performing， humming along nicely company。
One of the big discrepancies between net income and net cash and operations is depreciation。
and amortization。 Now remember that's not a source of cash， even though it looks like it here。
Remember depreciation reduces net income。 It's non-cash so we have to add it back to get to cash and operations。
Fairly big number for 3M because it does a lot of manufacturing and manufacturing companies。
tend to have high depreciation and amortization。 And we have a number of other non-cash expenses。
So things like pension， stock-based compensation， and we have some different taxes and excess。
tax benefits。 So first the pension and post retirement contribution， stock-based compensation。
These are things we recognize as expenses now， which means they're part of net income。
But the cash is either paid in the future， as is the case for pensions and post retirement。
benefits， or the cash really isn't paid as it is for stock-based compensation。
Although part of it is you're buying back treasury stock to use to satisfy options。 But in any case。
there's no cash flow this period for these expenses。
And we'll talk more about the stock-based compensation later on。 The pensions and post retirement。
that's beyond the scope of this course。 You'll have to come and take my course at Wharton。
my elective to see more on pensions， and post retirements。
The deferred taxes we'll obviously get to later in the class。
So then we get to the section on changes in assets and liabilities。
These are the changes in working capital。 And what we see is the big chunk here are accounts receivable and inventory are negative。
So let's think about what that means。 Negative number on the operating cash flow under the indirect method means that these。
amounts must be going up on the balance sheet。 Councillor Seawill goes up as a non-cash asset to stay in balance。
We have to subtract it on the cash flow statement。 And yes， even though you can't see it。
I am doing up and down arrows with my hand。 Inventories go up on the balance sheet。
non-cash asset going up。 We have to subtract that on the cash flow statement。
Bad news payable is also going up。 Now remember that's a liability。 So if accounts payable。
a liability increases。 It's on the other side of the balance sheet equation。
We have to increase it on the cash flow statement。 So these could represent either good or bad news。
Bad news scenario would be our customers are not paying us。
We're having trouble selling our inventory。 We're having to stretch our payables。
It's probably not the case here given the nice growth and profitability that's going， on。
And so a more likely story is it's still a growing company。
So during the year we're making a lot of credit sales at the end of the period。
We're building inventories and anticipation of future sales。
We are getting more raw materials at the end of the year in anticipation of production。
And so based on other things I've seen， it probably is a good news scenario that this。
is representing growth and working capital rather than bad news where you can't collect。
receivables and you can't get rid of your inventories。 So overall from the face of the statement。
it looks like a mature company that still has， some growth potential。
Now we're going to look at some other sections to try to get some additional information about。
what's going on with cash flows。 And yes， while you're looking at those cash flow statements that you downloaded from the。
internet， you should also take a close look at the operating section。 Look at net income。
look at cash operations and look at all the things that cause differences。
between the two to see what kind of items that you would have questions about or want。
to learn more about to understand why the company's net income is different from its cash flows。
Now I've jumped ahead to page 69 where we have footnote 6 which is supplemental cash。
flow information。
So if you remember back to the first video of the week， I said that there has to be a。
disclosure of cash taxes paid and cash interest payments。
And as we talked about in I think the second to last video， that disclosure is there。
So if people want to remove cash interest and cash taxes from operating cash flow， they。
have the number。 So in this footnote， we see the cash taxes and the cash interest。
So if you want to start with the cash operations and the cash flow statement in terms of doing。
some kind of valuation to measure operating cash flow but you don't want tax or interest， in there。
you can pull those numbers out using this disclosure。
One last section to look at related to cash flows is in the management discussion and。
analysis which is on page 36。 Remember， this is the MD&A is the section where 3M management is supposed to provide。
their own narrative to explain what happened during the year。
So it will give us more insight into some of the numbers that we saw in the cash flow statement。
They repeat their operating section and talk about what happened in terms of their cash。
flows during the year。 The big reason for the year and year increase in cash flows is net income went up。
They do note that accounts receivable inventories and payables increased by 312 compared to。
increases of 484 last year but they really don't talk much about what happened with that。
Then at the bottom of the page they disclose free cash flow。 As I said a couple videos ago。
this is a voluntary disclosure。 Notice it's labeled as a non-gap measure。
That means that there's no requirement by the SEC or the FASB to provide this measure。
which also means there's no standardization。 Companies can define this measure however they want and when they do that they have to。
alert investors and analysts that this is a non-gap measure so it's not standardized。
So remember free cash flow is supposed to be operating cash flow minus investment in the， future。
So we've got net cash operations from the cash flow statement as 3M's operating cash。
flow and then they use purchase of PP&E as their measure of investment in the future investing。
in new property plant equipment which gives them a pretty high free cash flow。
And there's actually a pretty good definition。 I've seen a lot worse。
There's a pretty good definition of free cash flow but again before you would use this number。
you want to make sure you know it's in the definition and that you're comfortable with， it。
On the next page we have cash from investing activities and what they've done here is。
they've netted all the marketable securities action into a small number so instead of showing。
on the face the 5 billion they bought and then almost 5 billion they sold they just show。
a net number。 So it really highlights that the big drivers of cash out flows were purchased the PP&E。
and acquisitions。 And they tell you the PP&E is expanding manufacturing capacity in key growth markets especially。
international like China， Turkey and Poland and so we can see that they do still have growth。
opportunities and a lot of those growth opportunities seem to be international。
For acquisitions they refer us to node 2 you can go there and look I'm probably not going。
to jump ahead and look at that。
And then finally they talk about cash flows from financing activities。
So remember the big chunks here were proceeds from I'm sorry purchase of treasury stock。
and the treasury stock they say is for stock based compensation。
Now we'll talk about this later in the course but basically stock based compensation is where。
you award your employees either stock options or stock grants you could either issue new。
stock to satisfy that or what most companies do is they just buy back their own stock and。
then either sell it to employees or give it to employees under the stock based ownership。
plan or compensation plans。 And then the other big chunk here is dividends to stockholders 3M has paid dividends since。
1916。 So we're almost on 100 years of dividends and again just consistent with companies that。
are very mature products throwing off a lot of cash one thing they tend to do is they。
start paying dividends 3M started pretty early。 Not sure it was posted notes in 1916 and the thing about dividends is they tend to be sticky。
once you start paying them you always want to keep paying them if you ever cut them it。
would be viewed by the market as bad news。 So that's where we find all of the cash flow information in the annual report and that's。
going to wrap it up for our week on cash flow statements。
Hey I was going to say that well this does wrap up our week long look at the cash flow， statement。
I know it was difficult and there were some parts that didn't probably make a lot of sense。
right off the bat but the cash flow statement is a very important statement and we're going。
to be seeing it again and again and again as we look at more advanced topics and the more。
you see it the more you'll get the hang of it。 I'll see you next time。 [BLANK_AUDIO]。
