Cash Flow Statement

1
Cash Flow Statement

• Chapter 21

2
Cash Flow Statement Objectives

• To provide information about
• cash receipts,
• cash payments, and
• the net change in cash from
• operating, investing, and financing activities

3
Questions the Statement of Cash Flow Answers

• Where did the money come from?
• Where did it go?
• What was the change in the cash balance
• What caused the change in the cash balance

4
Format of the Cash Flow Statement

• Operating Activities
• Investing Activities
• Financing Activities
• Non-cash Activities

5
Operating Activities

• Cash received from customers
• Cash paid for e.g.,
• purchase of inventory
• Operating expenses
• Taxes
• interest

6
Operating Activities - ALERT

• Some investing or financing cash flows are
  classified as operating activities. E.g.,
• Receipts of investment revenue (interest and
  dividends) and
• Payments of interest to lenders are classified as
  operating activities because these items are
  reported in the income statement.

7
Investing Activities

• Cash received from sale of assets, e.g.
• Land
• Investment in stocks or bonds
• Cash spent on the purchase of assets
• Building
• Stocks or bonds
• Property

8
Financing Activities

• Cash received from Issuance of stocks or bonds
• Other borrowings
• Cash paid to retire debts or
• Repurchase stock
• Pay dividends

9
Non-cash Activities
Example Acquisition of assets in exchange for
stock
10
Comparative Cash Flow Examples
A B C
Operations (50,000) 50,000 50,000
Investing (100,000) 50,000 (60,000)
Financing 110,000 (140,000) 40,000
Net CF (40,000) (40,000) 30,000
Beg. Cash 50,000 50,000 50,000
End. Cash 10,000 10,000 80,000