Wall Street Prep

Welcome back to the Wall Street Prep Quick Lesson Series!

In this video, we’ll build a cash flow statement given an income statement and balance sheet in Excel. The accounting here is a simplified presentation of how the three major financial statements are inter-related and lays the foundation of financial statement models in investment banking. Many accounting questions that we see time and again in finance interviews are designed to test the understanding explained in this exercise.

Ready to Model? Before diving in to the videos below, be sure to download this lesson’s Excel model template: Cash Flow Statement template.

The Cash Flow Statement, Video 1

The Cash Flow Statement, Video 2

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Dylan
Dylan
April 27, 2019 10:27 am

Why is “Additional purchases of Intangible Assets” excluded from the CapEx in the CF?

Farouk
Farouk
April 11, 2021 1:39 pm

To calculate CapEx to arrive at cash from investing, we subtracted depreciation. But we have already subtracted D&A when we calculated cash from operations. Does that mean that we’re we subtracting depreciation twice (i.e. double counting)? Same question regarding amortization of intangibles when calculating increases in other L/T assets. Thanks!… Read more »

Last edited 5 months ago by Farouk
Gopal
Gopal
March 8, 2019 12:13 am

Why notes payables are not taken in calculating CFO in Video 1. Notes payable are also current liabilities. What all Current assets and current liabilities should be taken and what not to be considered while calculating Cash flow from operation.

Val
Val
May 9, 2021 12:21 am

On an unrelated note….How did you get the little number 1 and number 2 above and to the side of the words ‘Amortization’ and ‘Assume’?

Ivan
Ivan
May 8, 2021 4:06 pm

When I compare my results from compiling the CF statement from the Balance Sheet and IS to the CF shown by the firm I get different numbers. Why might that be?

Val
Val
May 7, 2021 7:15 pm

Great Explanation! Well simplified. I have 2 questions:- (1) Is your treatment of Deferred Taxes and Goodwill based on IFRS or US GAPP. I’m asking because I am more acquainted with IFRS. (2) Is it always presumed that Investment outflows are made in cash? If an investment is acquired on… Read more »

Allison Telee
Allison Telee
February 15, 2021 12:44 pm

A very clear and interesting presentation. Thanks!

A M
A M
July 2, 2020 12:33 pm

Regarding the decision to put “other long term assets” in investing — is this somewhat subjective, or are other Long Term Assets always (or 95%+ of the time) put into investing activities?

Olga Skliarova
Olga Skliarova
June 30, 2020 11:49 am

That was great!!! Thank you.

Job Osagie Amiolemen
Job Osagie Amiolemen
May 27, 2020 8:14 pm

Thank you for the presentation. Please why is dividend payment coming after the calculation of Net Income?

Marko
Marko
April 11, 2020 5:03 pm

Hi, Where would you place loan interest outflow? I assume that loan interest liability is part of notes payable position and as such is part of financing cash outflow. Would it be correct to first adjust operating cf for interest expense and than show actual interest paid under financing cf?… Read more »

Nathan Sunkutu
Nathan Sunkutu
April 6, 2020 5:08 am

Thank you

Video Time
11.08
Thais
Thais
March 3, 2020 10:38 am

I understood that if we have an increase in the accounts receivable, means that is a cash that you don’t have recognized as revenue. But this doesn’t mean that the clients are paying later, if we say that we did the DSO and the average payment still the same from… Read more »

Tariq
Tariq
February 24, 2020 3:42 am

Hi, why is goodwill (intangible asset) incorporated in the cashflow? Is it because the increase is due to cash out?

Abraham Tetteh Nartey
Abraham Tetteh Nartey
January 27, 2020 11:21 am

Useful tutorials

Andrew
Andrew
January 7, 2020 9:16 am

On the first CF video at around 9:51 mark, the instructor says that “if inventory went up, I must have paid cash for it somehow”. But couldn’t you have bought the inventory on account? And hence there would still be the increase in inventories on the balance sheet but the… Read more »

Cindy
Cindy
January 2, 2020 4:32 pm

What a great course! I learned something very useful. Thank you!

Chibueze Clinton
Chibueze Clinton
July 23, 2019 12:32 am

I thought since Depreciation has been added back at the cash from operation section it doesn’t need to be added to the cash from investing. How’s this so?

Mariam A
Mariam A
June 2, 2018 3:46 pm

Really enjoyed working through this! I plan on taking the boot camp so wanted to go through the videos as well. I love that it’s explained in such simply layman terms!

Supriya Jamdar
Supriya Jamdar
March 7, 2018 11:52 am

It was awesome, never learned preparing cashflow with reason as why inflow and outflow.
I was hardly able to tally the statements before. After this I don’t think I will make mistake.

IHTISHAM IRSHAD
IHTISHAM IRSHAD
November 17, 2017 12:10 pm

Owesome.
Good way to learn cash flow statment.
i am satisfied.

Qedani Dorothy Mahlangu
Qedani Dorothy Mahlangu
September 12, 2017 6:32 pm

Very useful lesson. Looking forward to future lessons.

Grace Agbavitor
Grace Agbavitor
August 22, 2017 3:59 am

This was definitely in layman’s term and I enjoyed it. The explanation was simple, clear and concise.

Hannah
Hannah
July 20, 2017 11:00 pm

This was a great and concise explanation!

Trent Rasmussen
Trent Rasmussen
July 3, 2017 3:43 pm

The template link, is not working. Any way of getting a new link for the cash flow template?

Ziad Qasqas
Ziad Qasqas
May 22, 2017 9:31 am

Well presented in short way.

Varun Sood
Varun Sood
April 4, 2017 9:48 pm

Hi, I am trying to figure why in the template, you didn’t have any separate row under the income statement for any other income /(expense) which might have been earned (incurred) not as part of the operating income but separately. For. eg., if we need to include “Loss on early… Read more »

Maria Caudle
Maria Caudle
November 15, 2016 10:47 am

I can’t wait to get all the video series and put it all to work on my first important deal. It will make me look like an expert once I come into my future client’s door.

Best Wishes

jawad hassan
jawad hassan
September 30, 2016 2:53 pm

Professionally formulated and well explained.

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The Wall Street Prep Quicklesson Series

7 Free Financial Modeling Lessons

Get instant access to video lessons taught by experienced investment bankers. Learn financial statement modeling, DCF, M&A, LBO, Comps and Excel shortcuts.