Chapter 16Revision3

Chapter 16Revision3 - Accounting Principles: A Business...

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Accounting Principles: Accounting Principles: A Business Perspective, 8e A Business Perspective, 8e Chapter 16: Analysis Using the Statement of Cash Flows Revision 3 – KJ Feb 2008 1
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Chapter 16 Purposes of the Statement of Cash Purposes of the Statement of Cash Flows Flows reports the flow of cash into and out of a business during an accounting period reports on the cash receipts and cash disbursements of an entity reports on the entity’s investing and financing activities for the period is REQUIRED REQUIRED each time a balance sheet and an income statement are presented 2
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Chapter 16 Statement of Cash Flows-Basic Statement of Cash Flows-Basic Content Content Illustration 16.1 Statement of Cash Flows Shows Cash flows from Operating activities Cash flows from investing activities Cash flows from financing activities Investing and financing activities that do not affect cash are shown in a separate schedule 3
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Chapter 16 Uses of the Statement of Cash Uses of the Statement of Cash Flows Flows Management uses provides feedback on results of past management decisions the statement of cash flows may: reveal that cash flows from operating activities are large enough to make proposed external financing unnecessary show why cash shortages , if any, exist cause management to change its dividend policy to conserve funds 4
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Chapter 16 Uses of the Statement of Cash Uses of the Statement of Cash Flows Flows (continued) (continued) Investor and creditor uses May provide investors and creditors information on the: enterprise’s ability to generate positive future net cash flows enterprise’s ability to meet its obligations enterprise’s ability to pay dividends need for external financing reasons for differences between net income and associated cash receipts and payments effects on an enterprise’s financial position of both its cash and noncash investing and financing transactions during the period 5
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Chapter 16 Information in the Statement of Information in the Statement of Cash Flows Cash Flows Cash receipts and cash disbursements are classified into three major categories: Cash flows from operating activities , Cash flows from investing activities , and Cash flows from financing activities . 6
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Chapter 16 Statement of Cash Flows-Basic Statement of Cash Flows-Basic Content Content Illustration 16.1 Statement of Cash Flows Shows Cash flows from Operating activities Operating activities Cash flows from investing activities investing activities Cash flows from financing activities financing activities Investing and financing activities that do not affect cash are shown in a separate schedule 7
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Chapter 16 General General Electric Electric Statement Statement of Cash of Cash Flows Flows 8
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Chapter 16 General Electric General Electric Statement of Cash Flows Statement of Cash Flows GE Cash Flow data on google.com GE Cash Flows in 2006 Cash Flow from Operating Activities = $30.65 billion
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Chapter 16Revision3 - Accounting Principles: A Business...

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