Chapter 14_Lecture_Summer_2010

Chapter 14_Lecture_Summer_2010 - 1. Indicate the usefulness...

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Unformatted text preview: 1. Indicate the usefulness of the statement of cash flows. 2. Distinguish among operating, investing, and financing activities. 3. Prepare a statement of cash flows using the indirect method. 4. Analyze the statement of cash flows. Chapter 14 Study Objectives Chapter 14 Study Objectives The Statement of Cash Flows: Usefulness and Format Preparing the Statement of Cash Flows Indirect Method Using Cash Flows to Evaluate a Company Usefulness Classifications Significant noncash activities Format Preparation Indirect and direct methods Step 1: Operating activities Step 2: Investing and financing activities Step 3: Net change in cash Free cash flow Statement of Cash Flows Statement of Cash Flows Provides information to help assess: 1. Entitys ability to generate future cash flows. 2. Entitys ability to pay dividends and obligations. 3. Reasons for difference between net income and net cash provided (used) by operating activities. 4. Cash investing and financing transactions during the period. Usefulness of the Statement of Cash Flows Classification of Cash Flows Income Statement Items Operating Activities Generally Long- Term Asset Items Investing Activities Generally Long- Term Liability and Equity Items Financing Activities Classification of Typical Inflows and Outflows Classification of Cash Flows Operating activities - Income statement items Cash inflows: From sale of goods or services. From interest received and dividends received. Cash outflows: To suppliers for inventory. To employees for services. To government for taxes. To lenders for interest. To others for expenses. Classification of Typical Inflows and Outflows Classification of Cash Flows Investing activities- Changes in investments and long- term assets Cash inflows: From sale of property, plant, and equipment. From sale of investments in debt or equity securities. From collection of principal on loans to other entities. Cash outflows: To purchase property, plant, and equipment. To purchase investments in debt or equity securities. To make loans to other entities. Classification of Typical Inflows and Outflows Classification of Cash Flows Financing activities - Changes in long-term liabilities and stockholders equity Cash inflows: From sale of common stock. From issuance of long-term debt (bonds and notes). Cash outflows: To stockholders as dividends. To redeem long-term debt or reacquire capital stock. Which is an example of a cash flow from an operating activity? a. Payment of cash to lenders for interest. b. Receipt of cash from the sale of capital stock. c. Payment of cash dividends to the companys stockholders. d. None of the above. Question Classification of Cash Flows Classification of Cash Flows Which is an example of a cash flow from an investing activity?...
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Chapter 14_Lecture_Summer_2010 - 1. Indicate the usefulness...

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