Lecture09 2010.10.05 PostClass

Lecture09 2010.10.05 PostClass - 1 Lecture 9 Statement of...

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Unformatted text preview: 1 Lecture 9 Statement of Cash Flows and Cash Flow Analysis 2 Announcements • Those requesting absences should have received an email with date/time/location of the make-up exam • Exam #1: 10/14, 6-8pm • Locations: Alphabetical by Last Name A to F JMHH G06 G to Jiang SHDH 350 Jivani to Levit SHDH 351 Leylegian to Saborio CHEM 102 Saed to Yoo COHN G17 Yoshida to Zhu COHN 402 3 Announcements • Recitation this week: P13-2, E13-9, CP13-2 Any other questions • No recitations next week, but TAs still holding office hours • Corrected some typos in solutions to Practice Exam 4 Today’s Class • Recap of Last Class • Finish Simpson Corp example • Direct Method Overview & Cash Flow Calculations Recap: Statement of Cash Flows Purpose of Statement of Cash Flows is to reconcile why Net Income is different than change in Cash balance Stated differently, the Statement shows us how the change in Cash balance materialized The Statement of Cash Flows is broken down into three sections: Cash Flows from Operations Cash Flows from Investing Cash Flows from Financing What do we learn by partitioning cash flows this way? Statement of Cash Flows: Cash Flows from Financing Cash Flows from Financing include all cash flows in and out related to Obtaining debt (acting as a borrower) Issuing or repurchasing stock Paying dividends Accounts Payable are considered to generate from normal business operations, so they show up in the Cash Flows from Operations section 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 Paying off principal related to debt 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.) Purchasing or selling investment securities (stocks, derivatives, bonds, etc.) Lending (i.e. providing loans) Method of Calculation • Cash Flows from Financing and Investing – Direct Method : analyze all transactions that affect the cash account; then group the transactions into common activities and report how these activities affected cash • Cash Flows from Operations – Direct Method : analyze all transactions that affect the cash account; then group the transactions into common activities and report how these activities affected cash. – Indirect Method : reconcile net income to cash flow from operations by accounting for non-cash and/or non-operating items embedded in accounting net income Cash Flows from Operations: Indirect Method Cash Flows from Operations includes all cash flows related to “normal operations of the core business” This category is more complicated because we typically begin with Net Income and using the Indirect Method back into Cash Flows from Operations We add expenses that were included in net income but that did not reduce our cash balance (like depreciation)....
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This note was uploaded on 03/02/2011 for the course ACCT 101 taught by Professor Armstrong during the Fall '09 term at UPenn.

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Lecture09 2010.10.05 PostClass - 1 Lecture 9 Statement of...

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