We're ready to do the cash flow statement.

We're going to start with net income as per usual with a cash flow statement.

In a simple world, the net income would be the cash, but there are several items missing or adjustments that need to be made.

The first adjustment is the depreciation and amortization, which we already have unified in line 49.

We're going to leave it as a positive despite it being a cost.

This is because it represents a non-cash expense embedded in net income and needs to be adjusted out.

The other thing that's missing from net income is that it only contains p and l items.

So to supplement the cash flow statement, we're going to have to go and find things that are not captured by net income that represent cash in and outflows.

First off, OWC or operating working capital, you can see that we have a modest increase in networking capital and that will represent an outflow of cash.

The same logic can be used for other long-term assets, but quite different logic will need to be used for liabilities.

So the change in other non-current liabilities, what we'll need to do is say that any increase would actually be good for the company.

So we'll take this year and minus off last year.

So rise is good for cash.

You can then add up everything so far and get cashflow from operations.

Next, the cashflow statement unifies CapEx and purchases of intangibles.

We're going to go and grab the additions from PP and E, which is CapEx.

Then we're going to grab the capitalized r and d, which represents spending.

That would be classified as investment.

And we're going to grab the other additions to intangibles.

You can see that's come out as a positive figure.

So I'm going to wrap it in brackets or parentheses, flip the sign and turn that into a negative.

The change in long-term investment, I'm going to generate straight from the balance sheet.

You can see it's not doing anything, but we need to make sure it's okay.

A rise would be bad for cash flows, so it is last year minus this year in this case a change in asset.

You can then unify that into a cash from investing and we're free to move on to cash from financing and tie things up.

We could grab the change in long-term debt straight from the assumptions.

What we'll do instead though is we'll do it this way.

It'll be again this year minus last year, and that's because that rise in Debt represents borrowing, which is good for cash.

We'll now go and fetch the dividends.

They're already negative and they represent an outflow, so we can just drop them straight in there and we have cash from financing.

The next section is quite tricky in terms of logic.

What we're going to do in the last historical year is we're going to combine the cash and the short term debt and we're gonna create a negative figure there.

And what we're doing there is we're imagining if the company put its cash against its debt fully, what would the net position be? So we are predicting that in the final year, if they were to have swept all of their cash into the debt, they would be at minus 1300, which is a combination of those two figures.

We are then gonna roll that forwards and say, given that we have a net cash flow, which is modeled by these three, so a sizable inflow, where would we end up as a net position at the end of the year? And you can see that if we uh, predict a full sweep of all available cash into the short term debt, then we would've nearly paid off that short-term debt.

And this is going to be an assumption that we roll forwards in our model and it's called a simple cash sweep into short-term debt.

There are other ways of doing it, but this is the approach we're going to take in this model.

Now this leaves us with a net cash position, but unfortunately we need to employ a clever formula to then populate the balance sheet.

We are going to have to use a max formula, and that's because we want to take a zero.

If it's higher, then the negative figure that we see at the bottom there, what this does is take care of things so that if we have a positive figure, it will go and fetch it.

But if it has a negative figure, effectively it ignores it.

And that's because if we're in a net negative position, it stands to reason that we would've swept all of our cash into that debt.

We're going to use the same logic, but with a min function for the short term debt, we are going to say if the figure is positive, ignore it.

But if the figure is negative, go get it. Please.

We need to flip the sign 'cause we don't want a negative figure.

In the balance sheet you can see that that has done wonders for our balance sheet.

We predict a modest short-term debt going forward and we now have a fully balancing three statement model.

We can now take the workings that we have so far, hold them forwards, check that they balance every year, and we're reasonably confident that our model is free of problems.