《Chapter13 Statement of Cash Flows.doc》由会员分享，可在线阅读，更多相关《Chapter13 Statement of Cash Flows.doc（7页珍藏版）》请在三一文库上搜索。
1、Chapter13 Statement of Cash FlowsChapter 13Statement of Cash FlowsBusiness BackgroundPositive cash flows permit a company to . . .Expand its operations.Replace needed assets.Take advantage of market opportunities.Pay dividends to owners.Wall Street analysts consider cash flow an important indicator
2、of a companys financial health.Classifications on the Statement of Cash FlowsCashCurrencyCash EquivalentsShort-term, highly liquid investments.Readily convertible into cash.So near maturity that market value is unaffected by interest rate changes.Classifications on the Statement of Cash FlowsThe SCF
3、 must include the following three sections, as defined in FASB Statement 95:Operating ActivitiesInvesting ActivitiesFinancing ActivitiesBoston Beer uses the indirect method.The indirect method is used by 98.3% of companies.Statement continued . . .This ending cash balance should agree with the balan
4、ce sheet.Cash Flows from Operating ActivitiesCash inflows and outflows that directly relate to income from normal operations reported on the income statement.Cash Flows from Operating ActivitiesOutflows to:Purchase of goods for resale and services.Salaries and wages.Income taxes.Interest on liabilit
5、ies.Inflows from:Sales to customers.Interest and dividends received.Cash Flows from Operating Activities+_Cash Flows from Operating Activities - Indirect MethodNet IncomeCash Flows from Operating Activities - Indirect MethodChanges in current assets and current liabilities.+ Losses and - Gains+ Nonc
6、ash expenses such as depreciation and amortization.The indirect method adjusts net income by eliminating noncash items. Cash Flows from Investing ActivitiesCash Flows from Investing Activities+_Inflows from:Sale or disposal of property, plant, and equipment.Sale or maturity of investments in securit
7、ies.Outflows to:Purchase property, plant, and equipment.Purchase investments in securities. Cash Flows from Financing ActivitiesCash Flows from Financing Activities+_Inflows from:Borrowing on notes, mortgages, bonds, etc. from creditors.Issuing stock to owners.Outflows to:Repay principal to creditor
8、s (excluding interest).Repurchase stock from owners.Dividends to owners.Relationships to the Balance Sheet and the Income Statement Information needed to prepare a statement of cash flows:Comparative Balance Sheets.Income Statement.Additional details concerning selected accounts.Relationships to the
9、 Balance Sheet and the Income Statement? Cash = ?Liabilities ?Stockholders Equity ?Noncash AssetsDerives from . . .Assets = Liabilities ?Stockholders EquityRelationships to the Balance Sheet and the Income StatementUse this table when adjusting Net Income to Operating Cash Flows using the indirect m
10、ethod.Statement of Cash Flows Indirect Method ExampleUse the following financial statements for The Boston Beer Company and prepare the Statement of Cash Flows for the quarter ended on March 25, 2000. The Statement of Cash Flows will begin with Boston Beers Net income from the Income Statement.Next,
11、 adjust for the non-cash items included in net income.For Boston Beer, the only non-cash adjustment is for depreciation expense ($1,408). Since this number is not obvious in the Income Statement provided, it must be derived from other sources, such as the Notes to the Financial Statements or the Gen
12、eral Ledger Trial Balance.To complete the Cash flows from operating activities section, you must examine comparative balance sheets to determine the changes in current assets and current liabilities from the beginning of the period to the end of the period.(Remember, we showed the balance sheets a f
13、ew slides earlier.)Statement continued . . .The balance sheet indicates that Equipment decreased by $115 during the quarter.If you had access to additional company information, you would discover that the company sold equipment with a book value of $222 and purchased $1,515 of new equipment. This is
14、 offset by $1,408 in depreciation expense (see the Cash Flows from Operating Activities).Short-term investments decreased by a net $3,169 during the quarter.Further investigation of the accounting records reveals that Boston Beer sold short-term investments for $16,500 and purchased short-term inves
15、tments for $13,331. Contributed Capital decreased by a net $5,786. Boston Beer repurchased $5,801 of outstanding stock, which is a cash outflow. The company also issued capital stock to employees for $15, which is a cash inflow.Now we can reconcile the change in cash to the ending cash balance that
16、appears on the Balance Sheet. Required Supplemental Information:Cash paid for taxes and interest.Significant non-cash investing and financing activities. A Comparison of the Direct and Indirect MethodsNet cash flow is the same for both methods. The direct method provides more detail about cash from
17、operating activities.The investing and financing sections for the two methods are identical.Direct Method Operating ActivitiesRemember that when we prepared the operating section using the indirect method, we also arrived at net cash inflow of $2,922.End of Chapter 13Chester, ol buddy, I wonder if you could help me with a little cash flow problem Im having?