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7 Cards in this Set
- Front
- Back
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Purpose of the statement of cash flows
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- Effects on cash of a business's activities for an accounting period
- Includes cash and cash equivalents - Provide relevant information regarding cash receipts and cash disbursements - Enables management to make assessments |
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How is the statement of cash flows used by managers?
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- ability to generate positive future cash flows
- ability to meet obligations - shows the diff b/w net income and cash receipts and cash disbursements - effects of cash and non-cash investing and financial activities during period |
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Cash flows in terms of operating activities
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cash flow resulting from revenues (cash inflows) or sales of our product(s) and expenses from expenditures relating to our business
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Cash flows in terms of investing activities
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-cash flows from the acquisition and disposal of all non-current assets
-cash flows from the purchase and disposal of marketable securities |
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Cash flows in terms of financial activities
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-cash flows from the issuance and retirement of debt
-cash flows from the issuance and repurchase of capital stock |
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Direct vs. indirect methods of converting net income to net cash flow from operations
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direct
- cash receipts from sales - cash disbursements for expenses - expenses involving non-cash items ignored indirect - adjust net income for non-cash items |
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Identify issues involved in the analysis of statements of cash flow
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-SCF not analyzed by itself
-Management focus on operations and resources - SCF is relatively new - common-sized SCF may be useless - changes in cash flow by activity may be more useful analysis |
