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  • What are the three sections of the cash flow statement?

    The three sections are operating, inventing, and financing. The phrase “Oops I forget” is helpful to remember the three section. The “O” in oops represents operating, the “I” represents investing, and the “f” in forget represents financing. The operating section of the statement of cash flows will represent the cash inflows and outflows from operating activities. Investing activities represent a company’s cash flows from the acquisition or sale of noncurrent assets. Financing activities will include cash flows from debt and equity activities.

  • What is reported in the financing section of the cash flow statement?

    The financing section includes activities related to debt or equity activities. This would include issuing common stock, issuing preferred stock, treasury stock, dividend payments, issuing bonds, issuing notes, and payment of principal of debt.

  • How to calculate free cash flow?

    Free cash flow represents cash generated by the company through the income statement, but also needs to factor in changes in net working capital, capital expenditures, and other cash flow items. Unlevered free cash flow represents cash the company generates or losses prior to factoring in interest on debt, as well as state and federal income taxes. Free cash flow is a key metric as it helps a company understand if they can pay their debt on a monthly/quarterly/annual basis.