The combined cash flows from these three sections

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The combined cash flows from these three sections yield the net change in cash for the period. The three sections of the statement of cash flows relate to the income statement and to different parts of the balance sheet. These relations are highlighted in the table below: Cash}flow sectio .•.• Information from income statement Net cash flows from operating activities .... Revenues - Expenses = Net income Net cash flows from Revenues investing activities .... = Net income Net cash flows from financing activities .... Revenues - Expenses Net income Current operating assets Current operating liabilities . long-term operating and all long-term operating and all : nonoperating assets nonoperating liabilities ....................................................... ~qlJi!Y . : Current operating assets Current operating liabilities ! Long-term operating and all Long-term operating and all : nonoperating assets nonoperating liabilities ......................................... __ ~.9lJitX. . . Current operating assets Long-term operating and all nonoperating assets Current operating liabilities Long-term operating and all nonoperating liabilities
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Module 2 I Overview of Business Activities and Financial Statements 2-16 ifically, the three sections draw generally on the following information: ~-et cash flows from operating activities relate to the income statement and to the current asset and current liabilities sections of the balance sheet. ~iet cash flows from investing activities relate to the long-term assets section of the balance beet. _-et cash flows from financing activities relate to the long-term liabilities and stockholders' equity sections of the balance sheet. relations do not hold exactly, but they provide us a useful way to visualize the construction statement of cash flows. In analyzing the statement of cash flows, we should not necessarily conclude that the company er off if cash increases and worse off if cash decreases. It is not the change in cash that is most • rtant, but the reasons behind the change. For example, what are the sources of cash inflows? Are ources transitory? Are these sources mainly from operating activities? To what uses have cash ws been put? Such questions and answers are key to properly using the statement of cash flows. Exhibit 2.8 shows Apple's statement of cash flows. Apple reported $18,595 million in net inflows from operating activities in 2010. This is substantially greater than its net income of ~ -.D13 million. The operating activities section of the statement of cash flows reconciles the fence between net income and operating cash flow. The difference is due to the add-back of =xHIBIT 2.8 Apple's Statement of Cash Flows ($ millions) APPLE INC. Statement of Cash Flows For Year Ended September 25, 2010 ing activities -.,come . ents to reconcile net income to cash generated by operating activities: :lepreciation, amortization and accretion .
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