1. Statement of Cash Flows
The Statement of Cash flows
Provides managers
and
external readers of the financial statements
With information to determine
What has caused cash to increase or decrease

2. What caused cash to increase or decrease?
Cash is important to any healthy business and demonstrates an ability for the company to meet obligations, expand, and invest
There are three sections to the Statement of Cash Flows (SCF)
The operating section (cash from or used by the company’s business)
The investing section (cash from or used by the company’s investments in long-term assets or investments in long-term equity or debt [stocks and bonds] of other companies)
The financing section (cash from or used by borrowing or from issuing of shares)
If a company is generating cash from operations, it is more desirable than if it is generating the lion’s share of its cash from selling off investments, borrowing from banks or issuing shares of its stock. Although selling property, plant and equipment, borrowing, or issuing stock are great ways to raise cash for expansion, the company must be able to meet its day-to-day obligations from its operations.

3. Information from the Income Statement and Comparative Balance Sheet Are Used to Prepare the SCF as well as other GL information provided
Operating Section – Uses information from the income statement and current asset and liability section of the balance sheet
Investing Section – Uses information from the long-term asset section of the balance sheet
Property Plant and Equipment
Long-Term Investments in debt and equity instruments of other companies
Financing Section – Uses information from the long-term liabilities and equity section of the balance sheet
Bank Loans
Issuing shares of the company’s stock
Payment of dividends

4. The Statement of Cash Flows

5. An Example. Both the Income Statement and a Comparative Balance Sheet are needed to prepare the SCF

6. The Operating Section – Indirect Method

7. Operating Section and the Income Statement

8. Operating Section and the Income Statement

9. Operating Section and the Income Statement

10. Operating Section and the Income Statement

11. Operating Section and the Balance Sheet

12. Operating Section and the Balance Sheet

13. Operating Section and the Balance Sheet

14. Operating Section and the Balance Sheet

15. Operating Section and the Balance Sheet

16. Operating Section and the Balance Sheet

17. Investing Section and Long-Term Asset Section of Balance Sheet

18. Investing Section and Long-Term Asset Section of Balance Sheet

19. Investing Section and Long-Term Asset Section of Balance Sheet

20. Investing Section and Long-Term Asset Section of Balance Sheet

21. Financing Section and the Balance Sheet

22. Financing Section and the Balance Sheet

23. Financing Section and the Balance Sheet

24. Financing Section and the Balance Sheet

25. Financing Section and the Balance Sheet

26. Statement of Cash Flows

27. Statement of Cash Flows

28. Statement of Cash Flows

29. QS 16-19 Indirect: Preparation of statement of cash flows