Statement of Cash Flows

Statement of Cash Flows - Statement of Cash Flows 1 Cash...

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Statement of Cash Flows 1
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Cash Flow Statement Required presentation since 1987 Cash and cash equivalents Cash on hand Cash on deposit Investments in short-term, highly liquid securities Prior to 1987, the required statement was a sources and uses of funds statement 2
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Users/Uses of the Statement Internal users Determine dividend policy Evaluate cash generated by operations Review investing and financing policy External users Assess firm’s ability to increase dividends Assess firm’s ability to pay debt from operations Assess firm’s relationship of cash from operations to total cash 3
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Statement Structure Cash flows from operations + Cash flows from investing activities + Cash flows from financing activities = Change in cash + Beginning cash balance = Ending cash balance Supplemental disclosure: non-cash financing and investing activities 4
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Operating Activities The cash effects of transactions and other events that enter into the determination of net income: Cash inflows from •Sale of goods or services •Returns on loans (interest) •Return on equity securities (dividends) Cash outflows for •Payments for acquisitions of inventory •Payments to employees •Payments for taxes •Payments for interest •Payments for other expenses 5
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