lecture12 - ACCT 3220/Sept 20, 2010 Statement of Cash...

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ACCT 3220/Sept 20, 2010 1 Statement of Cash Flows: summary of periodic changes in the balance of cash Change in Cash Resulting from Operations + Change in Cash Resulting from Investment + Change in Cash Resulting from Financing = Total periodic Change in Cash (helps explain why the cash balance changed from the last period) Most commonly reported through indirect method (reconciling from net income) Statement of Cash Flows: Cash Flows from Financing Let’s start from the bottom up, since the bottom two categories are straightforward Cash Flows from Financing include all cash flows in and out related to Obtaining non-payables debt (acting as a borrower) Issuing or repurchasing equity Paying dividends Payables are considered to generate from normal business operations, so they show up in the Cash Flows from Operations section US: Interest expense payments do not belong in this section. They are considered part of normal business operations, so they show up in the Cash Flows from Operations section IFRS: Interest expense payments can be placed here or in Operations Paying off principal related to non-payables debt
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ACCT 3220/Sept 20, 2010 2 Statement of Cash Flows: Cash Flows from Financing Example: X Corp. issues 10,000 shares of common for $100,000. It also pays off $40,000 in long-term debt, and issues dividends of $10,000 Net Cash Flows from Financing = $100,000 - $40,000 - $10,000 = $50,000 Increase in cash Decrease in cash (in parentheses)
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ACCT 3220/Sept 20, 2010 3 Statement of Cash Flows: Cash Flows from Investing Cash Flows from Investing include cash flows in and out related to Purchasing or selling longer-term productive assets (land, equipment, etc.) Issuing debt (acting as a lender) Purchasing or selling investment securities (stocks, derivatives, bonds, etc.) US: Interest cash receipts relating to this debt belong in Cash Flows from Operations
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lecture12 - ACCT 3220/Sept 20, 2010 Statement of Cash...

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