BMGT 220 Chapter 13

BMGT 220 Chapter 13 - Financial Accounting, Seventh Edition...

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Slide 13-1 Statement of Cash Flows Financial Accounting, Seventh Edition Chapter 13
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Slide 13-2 Provides information to help assess: 1. Entity’s ability to generate future cash flows. 2. Entity’s ability to pay dividends and obligations. 3. Reasons for difference between net income and net cash provided (used)  by operating activities. 4. Cash investing and financing transactions during the period. Usefulness and Format Usefulness of the Statement of Cash Flows
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Slide 13-3
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Slide 13-4 Cash Deposits in Bank Accounts (Checking/Savings) l Short-term, highly liquid investments. l Readily convertible into cash. l So near maturity that market value is unaffected by interest rate changes (typically, less than 3 months) Meaning of Cash and Cash Equivalents Currency Cash Equivalents
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Slide 13-5 Income Statement  Items Operating Activities Generally Long-Term  Asset Items Investing   Activities Generally Long-Term  Liability      and  Equity Items Financing   Activities Classification of Cash Flows Usefulness and Format
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Slide 13-6 6 Operating activities include cash received and paid related to selling goods and rendering services and are directly related to the company’s primary day-to-day business activities. Operating Activities
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Slide 13-7 7 1. Acquisition and disposing of property, plant, and equipment and intangible assets 2. Purchase and sale of other company’s stocks, bonds, and other non cash-equivalent securities. Does NOT include purchase and sale of Treasury Stock. 3. Lending and subsequent collection of money (only principal). Cash Flows Involving… Investing Activities
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Slide 13-8 8 1. Obtaining capital from owners / stockholders 2. Paying dividends to owners/stockholders 3. Borrowing from creditors 4. Repaying amounts borrowed from creditors (only principal) 5. Purchase and reissue of Treasury Stock. Cash Flows Involving…. Financing Activities
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Slide 13-9 Significant Noncash Activities 1. Issuance of common stock to purchase assets. 2. Conversion of bonds into common stock. 3. Issuance of debt to purchase assets. 4. Exchanges of plant assets. Companies report these activities in either a  separate schedule  at the bottom of the  statement of cash flows or in a  separate note  or supplementary schedule to the  financial statements. Format of the Statement of Cash Flows
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Slide 13-10 Knowledge Check: The declaration of dividends by the board of directors would be reported on a statement of cash flows as a(an): 1. cash inflow under the financing activities 2. cash outflow under the financing activities 3. cash outflow under the investing activities 4. activity that would not be reported on a statement of cash flows
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Slide 13-11 Order of Presentation: 1.
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BMGT 220 Chapter 13 - Financial Accounting, Seventh Edition...

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