Scribd
Upload
21 views8 pages

Cashflow Notes

Uploaded by

suheylayakupoglu5
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
21 views8 pages

Cashflow Notes

Uploaded by

suheylayakupoglu5
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 8

Statement of Cash Flows

Chapter 12
• based on cash accounting
• amount of net income in a period is usually different
than the amount of increase in cash in the same
period
• reports the effects of the activities – investing,
financing, operations –of an entity on its cash flow
and ties the three activities of a business together
• cash includes cash and cash equivalents
– Cash equivalents: treasury bills maturing in 90 days or less;
investment funds; foreign currency on hand; checking
account and free savings account

1
Activities
1. Operations -- cash flows related to selling goods
and services; that is, the principle business of the
firm.
2. Investing -- cash flows related to the acquisition
or sale of non-current assets.
3. Financing -- long term and short term cash flows
related to liabilities and owners’ equity; dividends
are a financing cash outflow.

2
Components of the Statement of Cash Flows

Cash received from Cash paid for


cash flow
Operations sale of goods
and services - operating goods
and services = from operations

+ or -
Cash received from
cash flow
Investing sales of investments
and longterm assets - Cash paid to purchase
long-term investments = from investing

+ or -
Cash received from Cash paid for
cash flow
Financing issue of debt or
capital stock - dividends and to
repay debt or to buy
treasury stock
= from financing

=
Net change in cash
cash inflows cash outflows for the period
3
Classification of Cash in-flows and
From sales of goods and
outflows To pay wages
services to customers To purchase inventory
From receipt of interest To pay expenses
Operating Activities
or dividends To pay interest
From sale of trading To pay taxes
securities
To purchase trading sec.
From sale of PPE and other
long-term assets To purchase PPE and
other longterm assets
From sale of short or long-
term securities Investing Activities To purchase longterm
securities
From collection of loans
To make loans

From sale of common or


preferred stock To acquire preferred
From issuance of short
Financing Activities or common stock
or long term debt To repay debt
To pay dividends
4
Format of the Statement of Cash Flows
Name of the Company
Statement of Cash Flows
For the period …

Cash from operating activities A


Cash from investing activities B
Cash from financing activities C
Net Change in Cash D = (A+B+C) increase or (decrease)
+ Beginning Cash balance CB, from the beginning statement of
financial position
Ending Cash balance =CB + D should equal to ending cash
balance in the ending statement of
financial position
Non-cash Investing and Financing Activities

5
Determination of Cash Flows From Operating
Activities

Direct Method
Income Statement items are converted to cash flows
individually

Indirect Method
Net income or loss is adjusted for accruals such as accounts
receivable and payable, and for non-cash expenses such as
depreciation
reconciliation of the accrual based and cash based
accounting

6
Indirect Method- operating activities
Net income
+ noncash expenses: depreciation, amortization,
gain/loss on sale of PPE, etc.
+ loss on sale of asset
+ increases in current liabilities
+ decreases in current assets
- gain on sale of asset
- decrease in current liabilities
- increase in current assets

7
8

You might also like

pFad - Phonifier reborn

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


Alternative Proxies:

Alternative Proxy

pFad Proxy

pFad v3 Proxy

pFad v4 Proxy