I think this is actually probably the most important statement for us to look at.
It's my favorite.
That's where we can get the most information about what's going on with
companies.
It does tend to be ignored sometimes, okay?
So I really want to emphasize that we can get a lot of information from the cash
flow statement, okay?
Let's look at a cash flow statement here to try to figure out,
what does a cash flow statement measure?
So you have DirectTV, again, for
the latest 12 months and for the two previous years.
So here the first item in the cash flow statement is gonna be net income.
Okay, so you're gonna start from the bottom of the income statement.
And then you are going to start adding and subtracting items.
And there is a very important rule that you should remember.
Don't forget this.
The sign of a number in the cash flow statement is very meaningful, okay.
So for example, let me go here to emphasize this.
So here you have a change in accounts receivable.
That's just use that example, okay?
This is -189, okay?
What this means is that accounts receivable
provided a cash flow of -189 million in that period.
Okay, so 189 million of cash came out of DirecTV in that
year because of accounts receivable.
And you can use the same rule for everything.
So for example, if you look at debt issued, that has a positive sign,
right, which means that that came into the company, so
cash came into the company in that year.
So the signs mean a lot.
So here you have, there are three parts in the cash flow statement,
as you can see here.
There is the operating cash flow part,
which is the top of the cash flow statement.
So you get to a measure of operating cash flow.
That tells you how much cash flow
the company has generated from operations, okay?
And then we have investing cash flow, okay?
So investing cash flow which will generally be negative.
You can see here that it's -3.3 billion for DirecTV.
Okay, so that means what?
Remember just the sign, right,
it means that DirecTV invested 3.3 million in that year, okay?
And then at the bottom, you're going to have the financing cash flow.
Cash is going to go in and
out of the company as well because of financial decisions like dividends, okay?
You can see here that DirecTV is not paying any dividends, okay?
But they are issuing debt, repaying debt, issuing stock, repurchasing stock.
So at the end, you are going to get a total cash from financing
in this case it's -1.7 billion, okay?
So again, what does that mean?
It means that DirecTV paid $1.7 billion of cash to investors in that year.
And then at the end, you're going to have the net change in cash,
which is the the sum of everything.
So that's the total amount of cash that the company generated in that year, after
taking into account operating, investment, and financing activities, okay?
So just by this discussion you see there
is a lot of information in the cash flow statement, right,
a lot of useful information about what's going on with the company, okay.
For you to understand that better, okay, I actually want you to work with an example.
A simplified example, before we go back to the cash flow statements for DirectTV and
Cablevision, let's think about what's going on with these companies.
We have four companies here, A, B, C, and D.
Okay, and I gave you the main items that you see in a cash flow statement,
operating, investment, and financing cash flows.
Okay, and the question that I want you to think about, using what we just learned
about the cash flow statement is, which of these companies is likely to be a startup,
a new company that is growing that is being started up now?
Okay, which of these, A, B, C, or D is likely to be a startup?