Chapter13 - 13-1 Chapter 13 STATEMENT OF CASH FLOWS...

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BUSI1002KLT, 07/08 13-1 STATEMENT OF CASH FLOWS Chapter 13
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BUSI1002KLT, 07/08 13-2 Learning Objective LO1 Explain the purposes and uses of a statement of cash flows.
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BUSI1002KLT, 07/08 13-3 Provides information about the cash receipts and cash payments of a business entity during the accounting period. Helps investors with questions about the company’s Helps investors with questions about the company’s Ability to generate positive cash flows. Ability to generate positive cash flows. Ability to meet its obligations and to pay dividends. Ability to meet its obligations and to pay dividends. Need for external financing. Need for external financing. Investing and financing transactions for the period. Investing and financing transactions for the period. Purpose of the Statement of Cash Flows
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BUSI1002KLT, 07/08 13-4
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BUSI1002KLT, 07/08 13-5 Learning Objective LO2 Describe how cash transactions are classified in a statement of cash flows.
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BUSI1002KLT, 07/08 13-6 The Statement of Cash Flows must include the following three sections: Cash Flows from Operating Activities Cash Flows from Investing Activities Cash Flows from Financing Activities Classification of Cash Flows
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BUSI1002KLT, 07/08 13-7 Learning Objective LO3 Compute the major cash flows relating to operating activities.
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BUSI1002KLT, 07/08 13-8 + _ Inflows from: Interest and dividends received. Sales to customers. Cash Flows from Operating Activities Operating Activities Outflows to: Suppliers of merchandise and services. Employees. Lenders for interest. Governments for taxes.
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BUSI1002KLT, 07/08 13-9 Learning Objective LO4 Compute the cash flows relating to investing and financing activities.
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BUSI1002KLT, 07/08 13-10 Cash Flows from Investing Activities + _ Inflows from: Selling investments and plant assets. Collecting of principal on loans . Outflows to: Purchase of investments and plant assets. Purchase debt or equity investments. Make loans. Investing Activities
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BUSI1002KLT, 07/08 13-11 + _ Inflows from: Short-term and long-term borrowing. Owners (for example, from issuing stock). Outflows to: Make payments on borrowed funds. Owners for dividends. Purchase treasury stock. Financing Activities Cash Flows from Financing Activities
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BUSI1002KLT, 07/08 13-12 Cash Equivalents Cash Currency Short-term, highly liquid investments. Readily convertible into cash. So near maturity that market value is unaffected by interest rate changes. Cash and Cash Equivalents
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BUSI1002KLT, 07/08 13-13 Learning Objective LO5 Distinguish between the direct and indirect methods of reporting operating cash flows.
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BUSI1002KLT, 07/08 13-14 The operating cash flows section can be prepared using either the direct method or the indirect method. Let’s look at the direct method for preparing the Statement of Cash Flows.
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BUSI1002KLT, 07/08 13-15 Accrual basis revenue includes sales that did not result in cash inflows.
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