15 - Related to long-term debt and equity How a company...

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Cash Flow Statement Shows cash receipts and payments during a period Purposes: Predicts future cash flows Evaluates management decisions Determines ability to pay dividends and interest Shows relationship of net income to cash flows Importance of Cash Flow A company needs both net income and strong cash flow to succeed Distinguish among operating, investing and financing cash flows Cash Flow Categories Operating activities Related to the transactions that result in net income Most important as they reflect core of the business Investing activities Related to long-term assets How a company uses its resources in the long-term Financing activities
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Unformatted text preview: Related to long-term debt and equity How a company obtains resources Formats for Operating Cash Flows • Indirect Reconciles net income to cash provided by operating activities Easier to prepare • Direct Shows cash inflows and outflows by type Easier to interpret Prepare a statement of cash flows by the indirect method The Indirect Method Net Income Reconciling adjustments: + Depreciation/depletion/amortization + Losses on sales of long-term assets- Gains on sales of long-term assets + or - changes in current assets & current liabilities Net cash provided by operating activities...
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This note was uploaded on 06/14/2011 for the course ACCOUNTING 23020 taught by Professor Na during the Spring '11 term at Kent State.

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15 - Related to long-term debt and equity How a company...

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