Finance

Cash Flow Statement Explained: The Analyst’s Secret Weapon in Stocks

cash-flow-statement-explained-the-analysts-secret-weapon-in-stocks



The Cash Flow Statement is a secret weapon for analysts and investors, a way to see through the accounting tricks companies play on the income statement, and I’m showing you exactly how to analyze it to pick better stocks!

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Everyone loves the Income Statement. Investors fixate on revenue growth and the bottom-line earnings but don’t realize all the tricks management uses to manipulate these numbers. The Statement of Cash Flows is your opportunity to see through these accounting shenanigans and get a better picture of the cash generating power of a business.

Don’t miss our previous video and your ultimate guide to understanding the Income Statement. Don’t neglect the most popular financial statement and how it’s used to pick stocks!
https://youtu.be/qq1lD5NG-CY

In this video, I’ll give you a complete tutorial on the Statement of Cash Flows. I’ll explain what it is and what the cash flow statement shows. I’ll use examples from Apple and IBM to walk you through the cash flows of a company and how to use it to analyze stocks.

Then I’ll show you exactly how analysts use the cash flow statement to compare stocks. This is what I did for years as an equity analyst and I’ll teach you how to do it for any company. We’ll analyze free cash flow and work through the most important cash flow ratios for investors. I’ll show you everything from the cash flow statement basics to more advanced concepts to analyze stocks.

The cash flow statement is separated into three sections; operating, investing and financing. Operating activities is the cash generated directly from the business so this is the most important section. Cash flow is usually negative for investing activities because this is where it’s buying assets or investing in those long-term activities that will grow the business. Cash flow from financing is often negative, so an out-flow of cash, but can also be a positive cash inflow. If the company is paying off debt and paying dividends…like it should, then cash flow from financing will be negative. If it’s borrowing more money than it pays back or pays out as dividends though, it will be a cash inflow and a positive number…but that’s not necessarily a good thing.

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I know it’s a long video but this is one of the most important concepts in investing. This is the biggest part of your time as an analyst and every investor needs to know how to analyze the cash flow statement.

0:00 Cash Flow Statement Analysis Explained
2:30 What is the Statement of Cash Flows?
2:40 How is the Cash Flow Statement Different from the Income Statement?
5:10 What does the Cash Flow Statement Show?
5:45 Apple Cash Flow Statement Analysis
12:56 IBM Cash Flow Statement Example
16:25 How do Investors use the Cash Flow Statement?
19:12 How to Analyze Free Cash Flow
21:35 Important Cash Flow Ratios for Stocks

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Joseph Hogue, CFA spent nearly a decade as an investment analyst for institutional firms and banks. He now helps people understand their financial lives through debt payoff strategies, investing and ways to save more money. He has appeared on Bloomberg and on sites like CNBC and Morningstar. He holds the Chartered Financial Analyst (CFA) designation and is a veteran of the Marine Corps.

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30 Comments
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Robert Dunfee

30 Comments

  1. Let's Talk Money! with Joseph Hogue, CFA
    July 19, 2021 at 1:54 am

    Don't miss the first in our financial statements video…learn how to analyze the Income Statement! 💰 https://youtu.be/qq1lD5NG-CY

  2. yippeekiyaymfs
    July 19, 2021 at 1:54 am

    This are some high value content offered for free.
    Thank you Joseph Hogue

  3. bloomingblossums
    July 19, 2021 at 1:54 am

    Hey Joseph, thanks for another great video! Will you also be doing one on the balance sheet?

  4. BuyN' Dips
    July 19, 2021 at 1:54 am

    this should have more likes, this video, in fact all your videos, are great!! Its rare to see an actual CFA holder doing videos like this!!

  5. Jon D
    July 19, 2021 at 1:54 am

    How the hell did you download that into an excel sheet. I'm having so much trouble. Which website did you use to download?

  6. fullerton childcare
    July 19, 2021 at 1:54 am

    Thank you, for great content

  7. Marcus Alexander
    July 19, 2021 at 1:54 am

    Love your videos man,
    Im a full time Realestate investor now shifting interest to stocks and wanting to learn more about it

  8. Green Dot Whisperer
    July 19, 2021 at 1:54 am

    Thank you 🙏 for all the knowledge!

  9. Richard He
    July 19, 2021 at 1:54 am

    Thanks so much. This is great educational content. Work in finance and look at P&Ls and B/S all day but the cash flow statement is a weak spot.

    Friends just assume I've been in stocks since college but your videos have really been the most helpful in gaining personal stock investing literacy.

  10. Jan Shuster
    July 19, 2021 at 1:54 am

    I just buy funds and good companies and just trade price, gradually selling and buying.

    No matter how much you read there is always more and someone already beat you too it.

  11. Stan Morgal
    July 19, 2021 at 1:54 am

    Very useful. Keep the education coming.

  12. ONUR BUZAĞICIOĞLU
    July 19, 2021 at 1:54 am

    You are the king!

  13. El Dorian
    July 19, 2021 at 1:54 am

    What’s your opinion on Verizon ? EPS exceeded but it’s down to $55 will it stay like this for a while ?

  14. Andrew Napurano
    July 19, 2021 at 1:54 am

    do you think KRMD is still a good play. you recommended it a while ago and I'm bullish on medial supplies.

  15. Mark D
    July 19, 2021 at 1:54 am

    check out blozf. it is a pot breathalyzer. I love the concept. penny. no sales yet. siting on good money. virtually no debt. I love the concept.

  16. MICHAEL HERNER
    July 19, 2021 at 1:54 am

    Thanks Joseph.

  17. Noelle Bischoff
    July 19, 2021 at 1:54 am

    Very helpful, thank you .

  18. JamesNDelilah Pinckney
    July 19, 2021 at 1:54 am

    Video request 🙂
    I just filed my taxes and will actually get some $$ back. Do you have a video or will you be doing one with some options on how to invest tax refund? I’m not sure what the average return is I’m sure it can be scalable. I’m thinking of investing $1000 of what I get back.

  19. James Reynolds
    July 19, 2021 at 1:54 am

    Can you do a video about how Robinhood is illegally blocking trade to protect the rich

  20. Alexa Rívera
    July 19, 2021 at 1:54 am

    Thanks for the video higlhy appreciated☺️

  21. Ebay Addicts
    July 19, 2021 at 1:54 am

    Nice work 🦋🦋🦋🦋

  22. Eavy Eavy
    July 19, 2021 at 1:54 am

    Will you make video about GME?

  23. Rosy YONG
    July 19, 2021 at 1:54 am

    Dear Sir, another nice video! I wonder if it is possible to let us have a download of the slides in the video so that we can recap? Thanks

  24. Romeo 102
    July 19, 2021 at 1:54 am

    Thanks bow. Great video bro. U r the best…

  25. R D
    July 19, 2021 at 1:54 am

    Give a man a fish, feed him for a day…teach a man to fish, feed him for a lifetime. Thanks for teaching this stuff, it's important for investing.

  26. Disco Spyder
    July 19, 2021 at 1:54 am

    Imagine not commenting: ""“Minecraft" "asmr" "pewdiepie" "music" "fortnite" "markiplier" “YouTube is a perfectly balanced game with no exploits.” "Runescape" "World of Warcraft" "Shadowlands" "Dream" "MrBeast" "Warzone" "FaZe Clan" "100 Thieves" "Call of Duty" "Pokemon" "Pokemon cards" "card unboxing" "charizard" "they don't want you to know" "Flat earth" "round earth" "triangle earth" "earth is not earth" "what even is earth if not earth omg government is lying to you" "minecraft" "asmr" "pewdiepie" "music" "fortnite" "markiplier" “YouTube is a perfectly balanced game with no exploits.” "Runescape" "World of Warcraft" "Shadowlands" "Dream" "MrBeast" "Warzone" "FaZe Clan" "100 Thieves" "Call of Duty" "Pokemon" "Halo" "Devil may cry" “YouTube is a perfectly balanced game with no exploits.” “Cocomelon” “t series” “Minecraft" "hololive" "asmr" "pewdiepie" "music" "fortnite" "markiplier" “YouTube is a perfectly balanced game with no exploits.” "Runescape" "World of Warcraft" "Shadowlands" "Dream" "MrBeast" "Warzone" "FaZe Clan" "100 Thieves" "Call of Duty" "Pokemon" "Pokemon cards" "card unboxing" "charizard" "they don't want you to know" "Flat earth" "round earth" "triangle earth" "earth is not earth" "what even is earth if not earth omg government is lying to you" "minecraft" "asmr" "pewdiepie" "music" "fortnite" "markiplier" “YouTube is a perfectly balanced game with no exploits.” "Runescape" "World of Warcraft" "Shadowlands" "Dream" "MrBeast" "Warzone" "FaZe Clan" "100 Thieves" "Call of Duty" "Pokemon" "Halo" "Devil may cry" “YouTube is a perfectly balanced game with no exploits.” “Cocomelon” “t series”

  27. joey gauthier
    July 19, 2021 at 1:54 am

    Can you review Mindmed (Mmed.Ne)in your next video or the new Psychedelics sector and asset class

  28. Deborah Elliott
    July 19, 2021 at 1:54 am

    HAD IT NOT BEEN FOR WH BIDEN–I WOULD HAVE KEPT UP WITH GAMESTOP! The FASTEST I HAD EVER SEEN STOCK LIKE THAT TAKE OFF LIKE A ROCKET! DANG IT! At least I got some AMC before they shut that down!

  29. Floreden Pestanas
    July 19, 2021 at 1:54 am

    Thank you! love your videos

  30. Invest with Jase
    July 19, 2021 at 1:54 am

    LIKED LIKED liked liked liked !! can I please like this video 5x??! this is why your channel is the best always! thank you for continually giving back to us all.