Example: CVS Cash Flow Statements

Let’s go through the cash flow statements of CVS. Their use of the direct method for cash flow from operations is unusual and necessitates their disclosure of the reconciliation of cash flows from operations and net income.
 
You can download the statement here:

This video  gets us started:

On to the notes to make sure we know what we’re looking at:

Now to an overview:

Now, let’s look at the cash flow from operating activities:

Now consider the cash flow from investing activities:

Now consider the cash flow from financing activities:

Having considered the cash flows, it is important to remember that financial statements articulate – they fit together. To explain in detail how the cash flow statement is connected to the income statement, an entity must reconcile Net Income and Cash Flow from Operating Activities. As you will see, this reconciliation also involves balance sheet accounts, so it provides key clues as to how all three statements, the Income Statement, the Cash Flow Statement and Balance Sheets are connected.

Here is the reconciliation:

 

In this video, we discuss the reconciliation: