Equity Investment

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Equity Investment

Postby canipungoel » Sat Apr 18, 2015 2:12 pm

Items affecting actual cash flow from operations are ignored when the EPS plus non-cash charges estimate is used. For example, non-cash revenue and net changes in working capital are ignored.

Please help me understand the above statement.

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Equity Investment

Postby edupristine » Mon Apr 20, 2015 7:28 am

Non cash revenue do not affect cash flows and exact change in working capital affects cash flow.
Non cash revenues are unrealized revenues. A co. may have earned certain revenues in current accounting period but if cash payment is not occurred, they cannot add to the cash inflow total on the cash flow statement.
Change in working capital is the major way in which net income can differ in operating cash flows.
So when EPS plus non-cash charges is estimated, exact changes in working capital are ignored (Items affecting cash flows).

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