Skip to main content
Message Font: Serif | Sans-Serif
No. of Recommendations: 0
Thanks e,

Yea, your right. We do want to see this section of the cash flow statement negative if stock is being re-purchased and it's nice to see someone else see the section as important. I guess it could also be negative for pay-off of debt,etc.

I'm feeling a little silly about the second part of my question though. First, it was poorly worded and I did not articulate my confusion very well. Second, I just re-looked at Best Buy's(BBY) 2000 annual report and I think I have seen some light. Retained earnings appear to be simply reported earnings for the period and this value is reconciled(simply added) to net income from previous periods and provided on the balance sheet in the equity section. It appears some of the components of the Additional Paid-In Capital(e.g. re-purchase of stock) also tie the balance sheet(via equity) to the cash flow statement. I think I now have a grasp of the mechanics but I definitely need to think through the why portion of the issue.

Isn't there a bit of a double dipping going on though? Specifically, Earnings are the result of the income statement and the cash flow statement uses these same earnings to arrive at a new cash and equivalents. These same cash and equivalents are reported as an asset on the balance sheet and the equity section of the balance sheet is the difference between total assets less total liabilities. Where I get left in the dust is when I remember that the equity section of the balance sheet can be separately developed by adding common stock(at par value) with paid in capital and retained earnings. Didn't we just go full circle?

Clear as mud, isn't it? Sincere thanks for the reply e,

Print the post  


What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.