Preview

Cash Flow

Powerful Essays
Open Document
Open Document
2314 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
Cash Flow
Statement of
Cash Flows

Preview of Chapter

Usefulness and Format
Usefulness of the Statement of Cash Flows
Provides information to help assess:
1. Entity’s ability to generate future cash flows.
2. Entity’s ability to pay dividends and obligations.
3. Reasons for difference between net income and net cash provided (used) by operating activities.
4. Cash investing and financing transactions during the period.

SO 1 Indicate the usefulness of the statement of cash flows.

Usefulness and Format
Classification of Cash Flows
Operating
Activities

Investing
Activities

Financing
Activities

Income

Changes in
Investments and
Long-Term
Asset Items

Changes in
Long-Term
Liabilities and
Stockholders’
Equity

Statement
Transactions

SO 2 Distinguish among operating, investing, and financing activities.

Usefulness and Format
Classification of Cash Flows

Illustration 17-1
Typical receipt and payment classifications

SO 2 Distinguish among operating, investing, and financing activities.

Usefulness and Format
Classification of Cash Flows

Illustration 17-1
Typical receipt and payment classifications

SO 2 Distinguish among operating, investing, and financing activities.

Usefulness and Format
Significant Noncash Activities
1. Direct issuance of common stock to purchase assets.
2. Conversion of bonds into common stock.
3. Issuance of debt to purchase assets.
4. Exchanges of plant assets.
Companies report noncash activities in either a


separate schedule (bottom of the statement) or



separate note to the financial statements.

SO 2 Distinguish among operating, investing, and financing activities.

Usefulness and Format
Format of the Statement of Cash Flows
Order of Presentation:
1. Operating activities.

2. Investing activities.

Direct Method

Indirect Method

3. Financing activities.

SO 2 Distinguish among operating, investing, and financing activities.

Format of
Continue Reading
View Writing Issues

You May Also Find These Documents Helpful

  • Good Essays

    Mat 540 Quiz
    • 649 Words
    • 3 Pages

    Mat 540 Quiz

    | Classify the following items as (1) operating, (2) investing, (3) financing, or (4) significant noncash investing and financing activities, using the direct method.…

    • 649 Words
    • 3 Pages
    Good Essays
    Read More
  • Good Essays

    CASH FLOW POLUUTER CORP
    • 1146 Words
    • 5 Pages

    CASH FLOW POLUUTER CORP

    1. What is the appropriate classification in the statement of cash flows in the company’s December 31, 2010, financial statements for its purchase of 2012 EAs from Clean Air Corp ?…

    • 1146 Words
    • 5 Pages
    Good Essays
    Read More
  • Satisfactory Essays

    xacc 291 week 7
    • 391 Words
    • 2 Pages

    xacc 291 week 7

    Cash flows from operating activities represent the cash collected from the primary revenue generating activities and will include all transactions from the operations of business. Operating activities are short term activities which only affect the current accounting period and are calculated by adjusting net income from the changes in current asset and liability accounts.…

    • 391 Words
    • 2 Pages
    Satisfactory Essays
    Read More
  • Satisfactory Essays

    Acc 220 Financial Statement
    • 264 Words
    • 2 Pages

    Acc 220 Financial Statement

    * A balance sheet is summary of a company's financial condition at a specific point in time, including assets, liabilities and net worth. It allows the company to know what they have been paying for or what they owe out to people. An income statement is a report that tracks a company’s revenues, gross profits, operating income, and net worth. All businesses need to have revenue in order to establish a good foundation to have their business up and running. A retained earnings statement is the portion of net income not paid out to investors in the business as dividends. If the company earns a profit they have to decide whether or not to invest it or keep it as theirs and distribute it evenly throughout the others in the company. Statement of cash flows provides information about an entity's cash receipts and cash payments during a period. Cash flow statements classify cash receipts and payments according to whether they stem from operating, investing, or financing activities. Assets are any item or items of economic value owned by an individual or corporation, especially that which could be converted to cash. A liability is an obligation that legally binds an individual or company to settle a debt. Comparative statements are financial statements for different periods that allow the comparison of figures to illustrate trends in a company’s performance. Stockholder’s equity is the part of the balance sheet that represents the capital received from investors in exchange for stock donated capital and retained…

    • 264 Words
    • 2 Pages
    Satisfactory Essays
    Read More
  • Better Essays

    Cash Flow Analysis Paper
    • 935 Words
    • 4 Pages

    Cash Flow Analysis Paper

    Saving money is extremely important however; some people do not have healthy savings thus leading them to financial instability. Therefore, being a good steward over your finances should be consistent and begin at an early age and progress as you age. This will provide an effective growth pattern to allow future financial security.…

    • 935 Words
    • 4 Pages
    Better Essays
    Read More
  • Satisfactory Essays

    Acc291
    • 267 Words
    • 2 Pages

    Acc291

    Companies use a statement of cash flows because it shows where cash came from and how it was used. The other main financial reports only provide a limited insight into the cash transactions of the company. While the other main reports utilize the accrual accounting basis, the statement of cash flows changes the accrual basis using the direct or indirect method. The indirect method is primarily used, however both are acceptable under generally accepted accounting principles. The statement of cash flows is divided into three sections and shown in the report in the following order. Operating activities is reported first, followed by investing activities, and finally financing activities. Operating activities deals with each transaction that involves both revenues and expenses. This category is considered important because operating activities are the best predictor of a company’s ability to generate future cash. This obviously is important information for investors as well as creditors when evaluating a company’s ability to grow and move forward. Investors can make educated guesses regarding the future cash flows based on the statement of cash flows better than viewing the other financial reports that utilize the accrual accounting basis. Investing activities include the transactions to purchase, sell, or dispose of company property. Loans and debt collection are also included in the investing activities with company plant and equipment. Investors can view the statement of cash flows to see if the company has sufficient cash on hand to pay stockholder dividends and meet future demands. Finally, financing activities includes receiving cash from stockholders, buying back company stock, and paying dividends.…

    • 267 Words
    • 2 Pages
    Satisfactory Essays
    Read More
  • Good Essays

    BUS 475 Final Exam - SET 1 / 100% correct answers / A+ Essay Example
    • 4928 Words
    • 20 Pages

    BUS 475 Final Exam - SET 1 / 100% correct answers / A+ Essay Example

    1) Which one of the following items is not generally used in preparing a statement of cash flows?…

    • 4928 Words
    • 20 Pages
    Good Essays
    Read More
  • Satisfactory Essays

    Cash Flow and Day
    • 337 Words
    • 2 Pages

    Cash Flow and Day

    You are required to “Participate” by posting a total of six (6) substantive messages in the Main Forum on at least three (3) separate days each week. You are required to post a response to at least two (2) of the five (5) “Discussion Questions” each week that can be identified by a blue “?” beside them. Substantial responses to “Discussion Questions” will count as part of your “Participation” requirement. There is no specific due date for “Participation” or “Discussion Questions”. You can pick any three (3) days during the week.…

    • 337 Words
    • 2 Pages
    Satisfactory Essays
    Read More
  • Better Essays

    Acc548 Week 5 Reporting Requirements Memo
    • 1040 Words
    • 5 Pages

    Acc548 Week 5 Reporting Requirements Memo

    * Cash Flows, the SCH use the four category GASB format of cash flows: (1) from operating activities; (2) from noncapital financing activities; (3) from capital and related financing…

    • 1040 Words
    • 5 Pages
    Better Essays
    Read More
  • Satisfactory Essays

    Encom Corporation
    • 369 Words
    • 2 Pages

    Encom Corporation

    For investment and operations purchases cash flow cannot be ignore but for a corporation’s performance every period the earnings are the best measure. The earnings number is the best matching of revenues and expenses. In cash flow the connection between expense and revenues is distorted.…

    • 369 Words
    • 2 Pages
    Satisfactory Essays
    Read More
  • Powerful Essays

    Tax Depreciation
    • 4777 Words
    • 20 Pages

    Tax Depreciation

    1) In the statement of cash flows, the cash flows from financing activities result from debt and equity financing transactions; including incurrence and repayment of debt, cash inflow from the sale of stock, and cash outflows to repurchase stock or pay cash…

    • 4777 Words
    • 20 Pages
    Powerful Essays
    Read More
  • Good Essays

    Acc 291 Weekly Reflection
    • 380 Words
    • 2 Pages

    Acc 291 Weekly Reflection

    I think this week was easier for me than others because of the simplicity behind the terms. The statements of cash flows include operating activities, investing activities and financing activities. Operating activities include cash flow from business operations, things like sales. Investing activities includes assets, and financing activities include stockholders equity. We learned about direct and indirect cash flows this week. Indirect cash flows are the most commonly used by business and consist of three major steps: (1) determine net cash, (2) figure changes in asset and liability accounts, and (3) compare the figures on the statement of cash flows to the balance sheet.…

    • 380 Words
    • 2 Pages
    Good Essays
    Read More
  • Satisfactory Essays

    Finance and Free Cash Flows
    • 440 Words
    • 2 Pages

    Finance and Free Cash Flows

    Brau Auto, a national autoparts chain, is considering purchasing a smaller chain, South Georgia Parts (SGP). Brau's analysts project that the merger will result in the following incremental free cash flows, tax shields, and horizon values:…

    • 440 Words
    • 2 Pages
    Satisfactory Essays
    Read More
  • Good Essays

    Cash Flows
    • 780 Words
    • 4 Pages

    Cash Flows

    The cash flow statement reports a company’s inflow and outflow of cash. While an income statement provides the information about whether or not a company made a profit, a cash flow statement can tell you whether the company generated cash. The cash flow statement also provides information regarding investing and financing activities that do not require the consumption of cash. All of these aspects are important for a company management to monitor because they all have such a strong effect on the financial health of the company. The examination of the cash flow statement should be a high priority for potential investors; the amount of money that flows in and out of a company is something that investors might want to monitor.…

    • 780 Words
    • 4 Pages
    Good Essays
    Read More
  • Good Essays

    Relationship between Various Financial Statements
    • 651 Words
    • 3 Pages

    Relationship between Various Financial Statements

    Financial statements are demonstrated in four different financial statements, which are balance sheet, income statement, retained earnings, and statement of cash flows. A balance sheet illustrates a financial picture at a point of time of what a business owns, which are the assets and what it owes, which are the liabilities. The income statement portrays how well a business performed during a period of time; and it reports revenue and expenses. The retained earnings statement indicates how much dividends are distributed and how much was retained in the business for future growth. Finally, the statement of cash flows presents the cash use in a business (Kimmell, et al, 2009).…

    • 651 Words
    • 3 Pages
    Good Essays
    Read More

Related Topics