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ACIS 2116 Chapter 16 Lecture Spring 2009

ACIS 2116 Chapter 16 Lecture Spring 2009 - ACIS 2116...

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ACIS 2116 Chapter 16 The Statement of Cash Flows
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12-2 The Statement of Cash Flows Helps investors determine how a company obtains its cash and how the company uses its cash. For example, did the company generate cash…. from normal operating activities? from borrowing? from issuing stock? from selling long-lived assets?
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12-3 The Statement of Cash Flows Did the company use cash to: Pay for normal operating activities? Pay its debts? Purchase long-lived assets? Pay dividends? Re-purchase shares?
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12-4 The Statement of Cash Flows Explains the change in a company’s cash balance from the beginning of the period to the end of the period. Helps investors answer questions such as: Does the company have enough cash to pay its short-term debts? Does it have enough cash to pay for normal operating activities or will it have to borrow? Does the company adequately manage its accounts receivable?
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12-5 What is “Cash”? Currency on hand Checking accounts, savings accounts & certain money market accounts Cash Equivalents Highly liquid short-term investments within 3 months of maturity Easily converted to cash Low risk Example: Treasury Bill
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12-6 Classifying Cash Flows Three Basic Sections in Statement of Cash Flows: Operating Activities Investing Activities Financing Activities
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12-7 Classifying Cash Flows In thousands for year ended December 29, 2007 Net cash provided by (used for) operating activities 53,794 $ + (-) Net cash provided by (used for) investing activities (37,109) + (-) Net cash provided by (used for) financing activities (543) Net increase (decrease) in cash 16,142 Cash and cash equivalents at beginning of period 63,147 Cash and cash equivalents at end of period 79,289 $ The Boston Beer Company, Inc. and Subsidiaries Condensed Statement of Cash flows
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12-8 Cash inflows and outflows that directly relate to revenues and expenses reported on the income statement. Operating Activities
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12-9 Cash Flows from Operating Activities Inflows from: Sales to customers. Interest and dividends received. + Outflows to: Purchase inventory and services. Salaries and wages. Rent, insurance, utilities, etc. Income taxes. Interest on liabilities. _ Operating Activities
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12-10 Cash Flows from Investing Activities + Inflows from: Sale or disposal of property, plant, and equipment. Sale or maturity of investments in securities. _ Outflows to: Purchase property, plant, and equipment. Purchase investments in securities. Investing Activities
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12-11 Cash Flows from Financing Activities + Inflows from: Borrowing on notes, mortgages, bonds, etc. from creditors. Issuing stock to owners.
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