Statement of cash flows cash flows from financing

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Statement of Cash Flows: Cash Flows from Financing Proceeds from common stock issuance $100,000 Long-term financing repayments (40,000) Common stock dividends (10,000) Cash provided by financing activities $50,000
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McDonald’s 10-K Report December 31, 2016 Increase in cash Decrease in cash (in parentheses)
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Statement of Cash Flows: Cash Flows from Investing Interest cash receipts relating to purchased debt belongs in Cash Flows from Operations Investing Activities Sale of plant assets Sale of investments Sale of intangibles Acquisition of plant assets Purchase of investments Acquisition of intangibles
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Example: X Corp. purchases equipment with cash for $75,000. It also loans $25,000 to Y Corp., and receives interest on that loan of $1,000 Net Cash Flows from Investing = ??? Statement of Cash Flows: Cash Flows from Investing Capital expenditures ($75,000) Purchases of loan securities (25,000) Cash used in investing activities $50,000
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McDonald’s 10-K Report December 31, 2016 Increase in cash Decrease in cash (in parentheses)
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Cash Flows from Operations
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Cash Flows from Financing and Investing Direct Method : analyze all transactions that affect the cash account; then group the transactions into common activities and report how these activities affected cash Cash Flows from Operations Direct Method : analyze all transactions that affect the cash account; then group the transactions into common activities and report how these activities affected cash Indirect Method : reconcile net income to cash flow from operations by accounting for non-cash and/or non-operating items embedded in accounting net income Direct vs. Indirect Cash Flow Statement
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Direct vs. Indirect Cash Flow Statement Differ only in the manner of reporting cash flows. The dollar amount of the Cash From Operations (CFO) is the same for both methods. SCF Operating CF Investing CF Financing CF Components of the SCF Type of SCF Direct SCF Indirect SCF OR Direct SCF (only)
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The Direct Method for CFO The Direct Method to Report the CFO For operating activities, report the activity (i.e., collection from customers, payment to suppliers, etc.) and the amount of the cash inflow or outflow in the Operations section of the Statement of Cash Flow
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2013 was the last year that Northrop Grumman used the direct method to report its operating cash flows The Direct Method for CFO
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The Direct Method for CFO The Direct Method to Report the CFO The FASB encourages companies to use the direct method. However, most of the companies use the indirect method. In part, this is because the FASB requires a separate schedule prepared by the indirect method even when the direct method is used. Companies using the indirect method does not have to disclose a separate schedule prepared by the direct method.
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Northrop Grumman discloses the indirect method CFO right after the statement of cash flows (direct method)
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Assets = Liabilities + Shareholders’ Equity Δ Assets = Δ Liabilities + ΔShareholders’ Equity Δ Cash + Δ OtherCA + Δ LTAssets = Δ Current Liab + Δ Long-term Liab + Δ Paid-in Capital + Δ Ret. Earnings Δ
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