USA Confused by Corporate Cash Flow Statements

[hephaestus]

Hi All,

I'm in the process of trying to educate myself about corporate financial statements. I think I understand the theory behind the "indirect" computation of cash flow -- basically, start with net income at the end of the year, and then adjust for changes in assets and liabilities, and for capital expenditures and financing transactions.

In the instructional examples that I've been studying, the changes in the asset and liability accounts are computed by subtracting the prior year's balance statement line items from the current year's, which seems logical and straightforward. But when I look at some real financial statements, to see this done in practice, the numbers I see in the cash flow statement don't seem to be related to the numbers in the balance sheet (except for cash at the beginning and end of the year).

For example, here are excerpts of the balance sheet and cash flow statement for Intel Corp., taken from their 2011 10-K (from the SEC's EDGAR website):

(I'm too new here to be able to post images directly, but the link to the excerpts is: imageshack.us/a/img72/2589/intcbalcfl.png -- depending on your browser, you may need to put the http colon slash slash in front of that string, but the forum won't let me do it -- not yet, anyway.)

Between the two tables, I've computed the year-over-year differences for five different balance sheet line items. But these values bear no obvious relationship to the values of the corresponding line items under "Changes in assets and liabilities" in the cash flow statement.

What's going on here? Have I misunderstood what needs to be done to compute the changes in assets and liabilities, or is there something more subtle going on? What am I missing? (And am I likely to find any clues about it by reading through the "Notes to Financial Statements"?)

Thanks,

M

 

[dannygenio]

the cash flow you have studied from school is just to simple to apply to the real world. I wish it was that simple like you said but there a lot more components in the statement of cash flow that makes it so complicated. For example, Fixed assets(the net change is not truely financing activity since there could be disposal of assets). those are non cash activities that you need to substract from Net Income like you do for depreciation.