BUSINESSWEEK ONLINE : JANUARY 22, 2001 ISSUE
BUSINESSWEEK INVESTOR The Heart of the Statement "Cash from operating activities" starts with net income and items that cause income to differ from cash. Then, it details how changes in various assets and liabilities affect cash. Net Income Most companies start with net income, from the Income Statement. Provision for Uncollectibles Tells you how much the company has set aside to cover bad customer debt. Tax Benefit from Stock Options When stock options are exercised, employers get a tax deduction. Receivables If receivables rise faster than sales, the company may not be collecting all it is owed. Any rise in receivables causes cash to fall. Inventories Buying inventory requires cash, so when inventories rise, cash falls. Accounts Payable When liabilities such as this increase, a company's cash balances do, too. By delaying payments to creditors, management frees up cash. Net Cash Provided by (or used in) Operating Activities: The closer this is to Net Income, the higher the quality of earnings, generally speaking. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS The Ins and Outs of Cash Flow TABLE: A Map of the Cash-Flow Statement TABLE: The Heart of the Statement TABLE: Does a Company Rely on Outsiders? INTERACT E-Mail to Business Week Online

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