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Owners or creditors cash cash flow identity to

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Unformatted text preview: Flow Identity to Sources and Uses of Cash Sources Once the components of the cash flow identity Once are calculated… are Convert the information into the Statement of Cash Convert Flow or Sources and Uses of Cash Flow The change in the cash account is the “bottom line” of The this statement this Three Categories Operating Activities Investing Activities Financing Activities Estimating Incremental Cash Flow Estimating Objective – Estimate future cash flow of a Objective project (for decision making) project Only Incremental Cash Flow used in decision Sunk Costs – Do not use Erosion Costs – Must account for lost sales of old Erosion products when new product introduced products Working Capital – new projects require working Working capital, must include in cash flow capital, Capital Expenditures – Usually large up front cash Capital flow out flow Depreciation and cost recovery on divesting assets Capital Spending and Depreciation Capital Capital Spending for a project is usually an up Capital front cash outflow front It is expensed on the income statement over It time via depreciation time Depreciation is not a cash flow Deprecation impacts cash flow through reduction in Deprecation taxes, a real cash flow taxes, Different Types Straight line depreciation Modified Accelerated Cost Recovery System Modified (MACRS) (MACRS) Capital Spending and Depreciation Capital Depreciation example for Cogswell Co...
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