Chapters 2 & 3 — Financial Statements
Build an Income Statement and an Indirect Cash Flow Statement from minimal inputs. Then connect to Free Cash Flow (FCF) used in valuation.
What you’ll practice
- Compute EBIT, EBT, taxes, and Net Income from basic inputs.
- Assemble Cash Flow from Operations (CFO), Investing (CFI), and Financing (CFF) using the indirect method.
- Derive Dividends from changes in Retained Earnings.
- Compute Free Cash Flow (FCF) quickly and see where it’s used.
Tip: Capex ≈ ΔNFA + Depreciation. Indirect CFO adjusts Net Income for non-cash items and working-capital changes (AR, Inventory, AP).
Income Statement — Quick Builder
If both tax rate and tax paid are entered, the tool prefers tax paid.
Cash Flow Statement (Indirect) — Builder
Opening & Closing
Operations
Investing
Financing
Assumptions: Capex ≈ ΔNFA + Dep; Dividends = RE_beg + NI − RE_end. CFO (indirect): NI + Dep − ΔAR − ΔInv + ΔAP.
Free Cash Flow (FCF)
What is FCF?
Cash available to all investors after supporting operations: FCF = EBIT(1−T) + Dep − Capex − ΔNOWC. Uses: pay interest & debt principal, dividends, buybacks, or acquire non-operating assets.
Class Exercise — One-Click Preload
Loads your 2017→2018 numbers, computes IS and CF, and matches the worked solution (Net income 3,843; CFO +2,798; CFI −1,680; CFF −2,175; ΔCash −1,057; End Cash 1,003).
FYI Links & Tools
- SEC EDGAR company filings (10-K/10-Q): sec.gov/edgar
- Free Cash Flow calculator: jufinance.com/fcf
- Ratio Analysis template: jufinance.com/ratio
- finviz stock screener: finviz.com/screener.ashx
- FYI videos: Balance Sheet, Income Statement, Cash Flow Statement.