1. Cash Flow Statement

2. Why bother? Serves an important purpose Shows the amount of cash on hand Shows the ability to meet obligations Shows the ability to pay dividends Shows the ability to invest/finance Shows operating efficiency

3. Classifications of Cash Flows Operating Activity Income Statement Items Investing Activity Investments and Long Term Assets Financing Activity Long term Liability and Equity Items

4. More on Classification…

5. Some important Non-Cash Activities Issuance of stock to buy asset Conversion of Bonds into Stock Issuance of Debt to buy assets Exchange of plant assets

6. Cash Flow Statement - Format

7. Classification Example

8. Preparing the Statement Comparative Balance Sheets Current years income statement Other information

9. Two Methods Indirect Method Adjust Net Income for cash items Most popular Companies like it – Regulators do not Direct Method Shows operating Cash receipts and payments More inline with the goal of Cash Flow Statement Preferred by regulators

10. Indirect Method Adjust net income and turn into net cash

11. Indirect Method

12. Using the Indirect Method

15. Summary First take care of any Depreciation/Amortization etc. Then any gain or losses from Sale of assets Lastly check for changes in Current Assets and Current Liabilities

16. (Operating Portion)