DPM_3e_ch04__2003_041911

DPM_3e_ch04__2003_041911 - FINANCIAL ACCOUNTING Third...

Info iconThis preview shows pages 1–8. Sign up to view the full content.

View Full Document Right Arrow Icon
©Cambridge Business Publishers, 2011 Prepared by Diane Tanner Thomas R. Dyckman ■ Robert P. Magee ■ Glenn M. Pfeiffer Third Edition Chapter 4 Chapter 4 Reporting and Analyzing Reporting and Analyzing Cash Flows Cash Flows FINANCIAL ACCOUNTING
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
©Cambridge Business Publishers, 2011 2 Learning Objective 1 Learning Objective 1 Explain the purpose of the Explain the purpose of the statement of cash flows and how statement of cash flows and how it complements the income statement it complements the income statement and the balance sheet. and the balance sheet.
Background image of page 2
©Cambridge Business Publishers, 2011 3 Purpose of the Statement of Cash Flows Purpose of the Statement of Cash Flows Provides information about how a company generates cash and how it uses cash Enables investors and creditors To better assess a firm’s ability to settle its liabilities and pay dividends To determine a company’s need for outside financing Permits users to observe and assess management’s investing and financing policies
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
©Cambridge Business Publishers, 2011 4 Assessing Cash Flows Assessing Cash Flows Statement of cash flows help users assess… Liquidity Ability to pay near-term liabilities Solvency Ability to pay long-term liabilities Financial flexibility Ability to generate sufficient amounts of cash to respond to unanticipated needs and opportunities
Background image of page 4
©Cambridge Business Publishers, 2011 5 Cash and Cash Equivalents Cash and Cash Equivalents Short-term, highly liquid investments that are Easily convertible into a known amount of cash, and Close enough to maturity that their market value is not sensitive to interest rate changes Generally investments with initial maturities of three months or less The statement of cash flows explains the change in a firm’s cash and cash equivalents cash equivalents .
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
©Cambridge Business Publishers, 2011 6 Cash and Cash Equivalents Cash and Cash Equivalents On the statement of cash flows Cash equivalents are added to cash Treated as a single sum Why? The purchase and sale of investments in cash equivalents are considered to be part of a firm’s overall management of cash rather than a source or use of cash Managers refer to cash and cash equivalents as ‘cash’ Same label used in the textbook
Background image of page 6
©Cambridge Business Publishers, 2011 7 Target’s Statement of Cash Flows Target’s Statement of Cash Flows Target Corporation Consolidated Statements of Cash Flows (millions) Year Ending Operating activities 1/30/10 1/31/09 Net earnings $2,488 $2,214 Reconciliation to cash flow Depreciation and amortization 2,023 1,826 Share based compensation 103 72 Deferred income taxes 364 91 Bad debt provision 1,185 1,251 Loss on disposal of property and equipment, net 97 33 Other non(cash items affecting earnings 103 222 Changes in operating assets and liabilities: Accounts receivable originated at Target (57) (458) Inventory (474) 77 Other current assets (280) (224) Other noncurrent assets (127) (76) Accounts payable 174 (389) Accrued and other liabilities 257 (230)
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 8
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 10/07/2011 for the course ACTG 500 taught by Professor Staff during the Fall '08 term at Ill. Chicago.

Page1 / 54

DPM_3e_ch04__2003_041911 - FINANCIAL ACCOUNTING Third...

This preview shows document pages 1 - 8. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online