Chapter 13 Statement of Cash Flows_Notes

Chapter 13 Statement of Cash Flows_Notes - Chapter 13...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 13 – Statement of Cash Flows Classifications of the Statement of Cash Flows Cash equivalent – a short term, highly liquid investment with an original maturity of less than three months Cash flows from operating activities – cash inflows and outflows directly related to earnings from normal operations o Inflows: cash from customers, dividends and interest on investment o Outflows: cash paid for purchase of goods for resale and services, salaries and wages, income taxes, interest on liabilities Direct method – reports components of cash flows from operating activities as gross receipts and gross payments Indirect method – adjusts net income to compute cash flows from operating activities Cash flows from investing activities – cash inflows and outflows related to the acquisition or sale of productive facilities and investments in the securities of other companies. (Purchase and disposal of long-lived assets and investments in securities_ o Inflows: sale or disposal of PPE, sale or maturity of investments in securities o Outflows: purchase of PPE, purchase of investment in securities Cash flows from financing activities – cash inflows and outflows related to external sources of financing for the enterprise o Inflows: borrowing on notes, mortgages, and bonds from creditors. Issuing stock to owners o Outflows: repayment of principal to creditors, repurchasing stock from owners, dividends to owners Combination of net cash flows from operating activities, investing activities, and financing activities, must equal the net increase (decrease) in cash for the reporting period ∆cash = ∆liabilities + ∆ stockholders’ equity - ∆ noncash assets Operating items on the balance sheet
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 3

Chapter 13 Statement of Cash Flows_Notes - Chapter 13...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online