Module VI· Three-Statement Model MechanicsIntermediate
Question

How do you construct the cash flow statement from the income statement and balance sheet?

Answer

Start with net income. Add back non-cash expenses such as D&A and impairments. Adjust for changes in working capital. Add investing cash flows such as capex, acquisitions, and asset sales. Add financing cash flows such as debt issuance, debt repayment, dividends, and equity issuance. Ending cash links back to the balance sheet.