David Eghbali’s Statement of Cash Flows

1. David Eghbali’s State?e?t of Cash Flows #davideghbali #davideghbalistatementofcashflows Is the Statement of Cash Flows the Best Way to Find a Profitable Firm? #StatementOfCashFlows I was especially interested in the David Eghbali Statement of Cash Flows. David calmly described the contents of what this statement contained: 1. Operating, 2. Investing and 3. Financing Activities. It seems that companies had a myriad of ways to generate income. I had heard cash flow mentioned before, like it was some miracle cure. I knew that banks loved positive cash flow. It showed that their business ideas were marketable. Positive cash flow was healthy, while high debt levels were negative. David Eghbali had done a good job schooling me in these financial concepts. What is EBITDA? Is That a Government Program? #EBITDA I started to see EBITDA crop up all over the place and wondered what this stood for. David had said that it was an abbreviation for "earnings before interest, income taxes, depreciation and amortization." I guess this abbreviation was faster to write. But why is EBITDA so important? I learned that it meant that the aforementioned earnings were not the bottom line. There were still EBITDA costs to subtract.

2. What is Net Income? #NetIncome As I reviewed the Cash Flow Statement, I kept seeing a reference to Net Income. "David, what is Net Income?" David Eghbali politely explained that Net Income consisted of Earnings minus Taxes. Net income does not equal dividends. Each company can decide how it will spend its net income - repurchase their own shares, invest in research & development, acquire other firms or increase dividends. Doesn't Depreciation mean "to lose value?" #Depreciation I had heard that businesses could depreciate their equipment and vehicles over time. This depreciation is included in financial statements. It is a useful way to properly determine the market value for the physical assets of the company. What Does EPS Signify? #EPS Another term, I continually encountered was EPS. David said that EPS meant "earnings per share" or "net income applicable to common shares on a fully diluted status." Was this the famous bottom line? David said "Yes." Is GAAP a Standard? #GAAP Thanks to David, I started to have an understanding of what different acronyms might mean. The GAAP is defined as Generally Accepted Accounting Principles. These have been determined over a long period of time and are too numerous to list on each financial statement. David Eghbali had also mentioned that two different types of bookkeeping were popular: historical cost and accrual accounting. Read more at: http://www.davideghbali.com/understanding-financial-statements-david-eghbali-part- two