Sources and Uses of Cash 3.1 LO1 Sources Cash inflow – occurs when we “sell” something Decrease in asset account Increase in liability or equity account Uses Cash outflow – occurs when we “buy” something Increase in asset account Decrease in liability or equity account © 2013 McGraw-Hill Ryerson Limited

Statement of Cash Flows Statement that summarizes the sources and uses of cash Changes divided into three major categories Operating Activity – includes net income and changes in most current accounts Investment Activity – includes changes in fixed assets Financing Activity – includes changes in notes payable, long-term debt and equity accounts as well as dividends © 2013 McGraw-Hill Ryerson Limited

Sample Statement of Cash Flows Numbers are in thousands Cash, beginning of year 6,489 Financing Activity Operating Activity Increase in Notes Payable 141,217 Net Income 471,916 Increase in LT Debt 517,764 Plus: Depreciation 362,325 Decrease in C/S -36,159 Increase in Other CL 141,049 Dividends Paid -395,521 Less: Increase in A/R -46,127 Net Cash from Financing 227,301 Increase in Inventory -93,692 Net Decrease in Cash -3,319 Increase in Other CA -82,150 Cash End of Year 3,170* Decrease in A/P -26,934 Net Cash from Operations 726,387 Investment Activity Fixed Asset Acquisition -957,007 Net Cash from Investments *Difference due to rounding of dividends Remind students that part of the increase in the C/S account shown on the statement of financial position is the increase in Retained Earnings. That is already incorporated in the net income under operating activity. Additions to RE = 471,916 – 395,521 = 76,395 Change in C/S = 1,761,044 – 1,648,490 - 76,395 = -36,159 © 2013 McGraw-Hill Ryerson Limited