chap13 - Adjustments to Net Income 6 Acct 284 Chap 13...

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1 Acct 284 Chap. 13 CHAPTER 13 Statement of Cash Flows
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2 Acct 284 Chap. 13 Cash Equivalents a cash equivalent is a short-term highly liquid investment with an original maturity of less than three months Examples: * commercial paper * treasury bills * money market funds
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3 Acct 284 Chap. 13 Purpose of the Statement of Cash Flows Balance sheet reports: * static cash balance * cash at end of period Balance sheet does not report: * sources or inflows of cash * uses or outflows of cash Income statement is accrual based
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4 Acct 284 Chap. 13 Operating Section Adjusts net income to a cash basis May be direct or indirect Direct adjusts each line of income statement to cash basis Indirect adjusts net income to cash basis by looking at what affected income that did not affect cash (most popular method)
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5 Acct 284 Chap. 13 Cash Flow Effect of Changes in Accounts Indirect Method Increase Decrease Asset - + Liability /Equity + -
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Unformatted text preview: Adjustments to Net Income: 6 Acct 284 Chap. 13 Investing Section Shows cash flows from buying and selling noncurrent assets including * property plant and equipment (capital expenditure) * investments Compared to cash from operations to see how much of investment funds are internally generated. 7 Acct 284 Chap. 13 Financing Section Shows cash flows from issuing and maintaining debt, issuing and repurchasing stock (our own) and paying dividends. Financing has to provide the bridge between the amount used in investing activities and the amount generated by operations 8 Acct 284 Chap. 13 Key Ratios Quality of Income = Cash from Operations Net Income * Measures how much of income is showing up as cash Capital Acquisition = Cash from Operations Capital Expenditures * Shows how much of capital expenditures comes from operations...
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This note was uploaded on 09/23/2009 for the course ACCT 284 taught by Professor Clem during the Spring '08 term at Iowa State.

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chap13 - Adjustments to Net Income 6 Acct 284 Chap 13...

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