Video Summary - Facebook, Inc.: Step-by-step statement of cash flows

Summary

The video explains how to read a statement of cash flows, using a highly condensed version of Facebook’s statement as an example.

Financial statements are prepared in this order:
1. Income statement
2. Statement of retained earnings
3. Balance sheet
4. Statement of cash flows
The statement of cash flows answers the question: How much cash did the company generate and spend during the period?
It reports changes in cash and cash equivalents from three types of activities:
- Operating activities
- Investing activities
- Financing activities
Cash generated by operating activities is especially important because it indicates whether a company’s core operations are producing cash.
The statement covers a period of time, such as a year or quarter, and shows the ending cash and cash-equivalents balance. That ending balance also appears on the balance sheet.

The heading identifies the company, statement, reporting period, and units—in this example, dollars in millions.
The statement presents operating, investing, and financing cash flows, followed by their net effect on cash.
Add or subtract that net amount from beginning cash and cash equivalents to arrive at the ending balance.
The example includes an “Adjustment to reconcile” line solely as a plug to make the condensed summary tie to Facebook’s full statement. It is not a meaningful line item in the actual statement.
The example is greatly condensed and is not suitable for investment use.

Which statement reports assets, liabilities, and equity at the end of the year? The balance sheet, because it reports balances on a specific date. The other three statements cover a period.
Which statements show ending cash and cash equivalents? The balance sheet and the statement of cash flows.

Speaker: An instructional narrator; the subtitles do not identify the narrator by name.
Example source: A condensed Facebook statement of cash flows.