1. Statement of Cash Flows
Format
Indirect Method
Free cash flow

2. Business Activities

3. Statement of Cash Flows
For the period ending …
Beginning cash
$ 10
+ Cash flow from operations (not same as Net Income) 90
- Cash flow from investments 20
+/- Cash flow from financing
-50
= Ending cash 30

4. Indirect method: Statement of Cash Flows
Cash flow from operating activities
Start with net income
Adjustments
Items on the income statement that do not represent a cash receipt or payment
Depreciation
Gains or losses on sale of assets
Included in cash flow from investments

5. Indirect method: Statement of Cash Flows
Cash flow from operating activities
Adjustments
Changes in current asset and liability accounts
Increase in current assets =
Decrease in current assets =
Increase in current liabilities =
Decrease in current liabilities =

6. Indirect method: Statement of Cash Flows
Cash flow from investing activities
Changes in long-term assets
Purchase of long-term assets is shown separately from sale of long-term assets
Includes gain/loss on sale
Plant assets
Analyze change in asset and accumulated depreciation
See Problem 13-5A

7. Indirect method: Statement of Cash Flows
Cash flow from financing activities
Changes in long-term liabilities and owners equity
Bonds: issue and repayment on bonds
Common stock: issue and repurchase of common stock
Payment of dividends

8. Free Cash Flow
Cash flow from operations – dividends – capital expenditures