Cash Flow - CHAPTER 2 33 7. Construction of the CASH FLOW...

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Unformatted text preview: CHAPTER 2 33 7. Construction of the CASH FLOW STATEMENT A combination of the Balance Sheet and Income Statement, the Cash Flow Statement (previ- ously known as the Statement of Changes in Financial Position or Statement of Sources and Uses of Funds, both presented in slightly different formats) shows the sources and uses of cash over the current accounting period, i.e., how the company generated and spent cash over the period. Sources: Net income Depreciation Decrease in assets Increase in liabilities Increase in capital stock (shares) Uses: Loss Increase in assets Decrease in liabilities Repurchase of capital stock (shares) Dividends paid to shareholders The difference between the sources and the uses of funds is explained by the change in Cash and Cash Equivalents , which typically consist of cash on hand and that held in the bank, net of short-term borrowings (e.g., notes payable, which is a source), and temporary investments (e.g., marketable securities, which is a use). investments (e....
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Cash Flow - CHAPTER 2 33 7. Construction of the CASH FLOW...

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