Cash flow and fund flow

Where a business's money actually goes. These lessons follow cash through the working capital cycle, show the two ways of building the operating figure, work out what is left after reinvesting, build a fund flow statement from two balance sheets, and give five questions for judging whether a profit is backed by cash.

The examples are Titan, whose cash is held in jewellery stock, and Info Edge, an online business with almost no stock, read side by side across two years. Where the filings leave something unexplained, the lessons say so instead of filling the gap.

5 lessons, about 1 hour 58 minutes of reading in all. Start at the top and go in order.

After this module you will be able to

• measure receivable, inventory and payable days and the cash cycle they add up to
• work out cash from operations by the direct and the indirect method, and say what each adjustment does
• compute free cash flow and list the claims that still come after it
• build a fund flow statement from two balance sheets and tell it apart from a cash flow statement
• ask five questions of any cash flow statement and read the answers without being misled

The lessons

1. Working Capital and the Cash Cycle23 minReceivable, inventory and payable days, the cash cycle they add up to, and why growth uses cash, shown with a live calculator and Titan's real accounts.
2. Direct and Indirect Cash Flow23 minWork out cash from operations by counting cash and by correcting profit, then see what the adjustments do in Info Edge's and Titan's real statements.
3. Free Cash Flow23 minFree cash flow, the claims that follow it and why 'free' can mislead, with a live calculator and Titan's and Info Edge's real cash flow statements.
4. The Fund Flow Statement25 minBuild a fund flow statement from two balance sheets, with a live calculator and Titan's real FY2023-24 accounts, and see how it differs from cash flow.
5. Reading Cash Flow Quality24 minFive questions and ratios for judging whether profit is backed by cash, tried on a live example and on Titan's and Info Edge's real two-year cash flows.

Start with the first lesson