Operating, Investing, Financing, footnotes Cash Flow Statement Operating, Investing, Financing, footnotes

What information is provided by the cash flow statement What information is provided by the cash flow statement?( in conjunction with the other financial statements?) Can the company generate positive future cash flows? Will it be ability to pay bills? Will it be able to give returns to owners? Is it likely to need to borrow more funds? What are the cash needs to invest in? What cash receipts are coming from financing? How much cash does daily operations generate?

Operating Activities- day to day cash flows Cash in from – products sold, services provided, collection of Accounts Receivables and trade Notes Receivable principle, prepayment from customers, interest and dividends earned, sale of trading securities Cash out for– operating expenses, prepaid items, interest expense, purchase of inventory, purchase of trading securities Determined by analyzing most of the current income statement and the changes in the current assets/liabilities of the balance sheet

Investing activities-expanding or contracting the business and replacing old assets Cash in from --sale of property, plant, & equipment, sale of investments (available for sale and held-to-maturity), collection of principle of nontrade loans, etc. Cash out from – purchase of property, plant & equipment, purchase of investments (available for sale and held-to-maturity), loaning money for nontrade purposes, etc. Determined by analyzing the changes in most of the long-term balance sheet assets, some short-term investments in current assets and gains/losses from the income statement, etc.

Financing activities —ways of raising money other than operations Cash in from – issuance of common or preferred stock and reissuing treasuring stock, borrowing funds (principle short-term or long-term), Cash out from – repurchasing stock (treasury stock), repaying principle on nontrade loans, payment of cash dividends, Determined from analysis of balance sheet liabilities (mostly long-term) and stockholder’s equity, statement of changes in stockholder’s equity.

Operating activities Direct Income statement on a cash basis Straight-forward presentation Preferred method by FASB More work than other method Indirect Reconciliation format Acceptable but not preferred by FASB Less informative to statement readers

Noncash investing/financing Footnote or schedule on cash flow statement to make statement more complete including all investing/financing type transactions Includes such transactions as purchases of property, plant and equipment with equity or debt financing from owner of PPE, Convertible securities converted (bonds to common stock or preferred stock, preferred stock to common stock), exchange of assets for other assets, exchange of liabilities for other liabilities, etc.