lecture12_student - Statement StatementofCashFlows...

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Statement of Cash Flows Chapter 13
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nderstanding the Business Understanding the Business Positive cash flows permit a company to . . . Pay ay Expand its operations. owners. Pay dividends to Replace eeded assets Take advantage of market pportunities needed assets. opportunities. Wall Street analysts consider cash flow an important indicator of a company’s 13-2 financial health.
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lassifications of the Statement of Cash Flows Classifications of the Statement of Cash Flows Cash Currency Cash Equivalents hort- rm, highly liquid investments. Short term, highly liquid investments. Readily convertible into cash. So near maturity that market value is unaffected by 13-3 interest rate changes (i.e., less than 3 months to maturity).
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lassifications of the Statement of Cash Flows Classifications of the Statement of Cash Flows perating Cash inflows and outflows Operating Activities directly related to earnings from normal operations. Investing Cash inflows and outflows related to the acquisition or sale of productive cilities and investments in the Activities facilities and investments in the securities of other companies. Financing ctivities Cash inflows and outflows related to external sources of financing (owners and creditors) for the 13-4 Activities enterprise.
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ash Flows from Operating Activities Cash Flows from Operating Activities Inflows Cash received from: Cash Customers Dividends and interest on investments + Flows from est e ts Outflows ash paid for: Operating Activities Cash paid for: Purchase of goods for resale and services (electricity, etc.) _ Salaries and wages Income taxes terest on liabilities 13-5 Interest on liabilities
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ash Flows from Investing Activities Cash Flows from Investing Activities Inflows + Cash received from: Sale or disposal of property, plant and equipment Cash Flows Sale or maturity of investments in securities from Investing Outflows Cash paid for: Activities _ Purchase of property, plant and equipment Purchase of investments in 13-6 securities
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ash Flows from Financing Activities Cash Flows from Financing Activities Inflows Cash received from: ash + Borrowings on notes, mortgages, bonds, etc. from creditors Issuing stock to owners Cash Flows om utflows from Financing ctivities _ Outflows Cash paid for: Repayment of principal to creditors xcluding interest which is an Activities (excluding interest, which is an operating activity) Repurchasing stock from owners ividends to owners 13-7 Dividends to owners
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irect Method vs. Indirect Method Direct Method vs. Indirect Method Two Formats for Reporting Operating Activities irect Method direct Method eports the Direct Method tarts with Indirect Method Reports the cash effects of each operating Starts with accrual net income and activity converts to cash basis 13-8 Note that no matter which format is used, the same amount of net cash flows from operating activities is generated.
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relationships to the Balance Sheet and the come Statement Income Statement Information needed to prepare
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This note was uploaded on 05/10/2011 for the course ACCT 1002 taught by Professor Ng during the Spring '11 term at National University of Singapore.

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lecture12_student - Statement StatementofCashFlows...

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