Cash Flow Statement Chapter 21

Cash Flow Statement Objectives: To provide information about: cash receipts, cash payments, and the net change in cash from: operating, investing, and financing activities

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

Format of the Cash Flow Statement Operating Activities Investing Activities Financing Activities Non-cash Activities

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

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.

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

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

Non-cash Activities Example: Acquisition of assets in exchange for stock

Comparative Cash Flow Examples B C Operations (50,000) 50,000 Investing (100,000) (60,000) Financing 110,000 (140,000) 40,000 Net CF (40,000) 30,000 Beg. Cash End. Cash 10,000 80,000