121_12 - CHAPTER 12 STATEMENT OF CASH FLOWS December 31,...

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CHAPTER 12 STATEMENT OF CASH FLOWS Income Statement Statement of Retained Earnings Statement of Cash Flows Increases Decreases Balance Sheet Cash 1,000 Balance Sheet Cash 2,500 December 31, 20X1 (a point in time) For Year Ended December 31, 20X2 (a period of time) December 31, 20X2 (a point in time) STATEMENT OF CASH FLOWS ± Understand current financial position ± Predict the future ± Expand business? ± Pay dividends to stockholders? ± Pay interest and principal to creditors? ± Avoid bankruptcy? ANSWER QUESTIONS ± Where did cash come from? ± Where did cash go to? ± Why net income cash flows? EXPLAIN WHY ± Increasing net income ± Many assets ± Little debt ± Run out of cash EXPLAIN WHY ± Not collecting accounts receivable ± Prepaying expenses ± Using cash to buy inventory ± Using cash to buy long-term assets ± Using cash to pay down debt
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STATEMENT OF CASH FLOWS Operating activities ± Result from revenues and expenses Investing activities ± Result from long-term assets Financing activities ± Result from stockholders’ equity, long-term debt, short-term notes SOURCES AND USES OUTFLOWS CASH Operating Activities Financing Activities Investing Activities INFLOWS Financing Activities Operating Activities Investing Activities OPERATING ACTIVITIES Cash collections from ± Customers ± Interest received ± Dividends received OPERATING ACTIVITIES Cash payments to ± Suppliers ± Employees ± Lenders for interest ± Government for income taxes OPERATING ACTIVITIES Cash payments to suppliers (vendors) ± Raw materials ± Finished goods ± Rent ± Utilities ± Insurance ± Advertising OPERATING CASH FLOW In the long run, operations must be the main source of cash for the business
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OPERATING CASH FLOW 20 Net operating cash flow (10) Cash paid for income taxes (20) Cash paid for interest (70) Cash paid to suppliers and employees 20 Cash received from interest 100 Cash collected from customers Operating activities (related to revenues, expenses) For the year ended December 31, 2011 Statement of Cash Flows Cirrus Corporation INVESTING ACTIVITIES Cash collections from ± Sale of property, plant, equipment ± Sale of long-term investment ± Collections of loans made Cash payments for ± Purchase of property, plant, equipment ± Purchase of long-term investment ± Loans to another company INVESTING ACTIVITIES
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This note was uploaded on 10/24/2010 for the course ACCOUNTING 31609 taught by Professor R.ambrose during the Fall '09 term at San Mateo Colleges.

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121_12 - CHAPTER 12 STATEMENT OF CASH FLOWS December 31,...

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