ACCT Chapter 12 - Reporting and Analyzing Cash Flows

Cash on hand + Cash in Banks + Undelivered Checks

"Cash" =

The three sections of the cash flow statement

1. Cash Flow from Operations 2. Cash Flow from Investing 3. Cash Flow from Financing Same as the three Business Activities

Operating Activities

Cash inflow and outflow related to revenue and expense accounts reported on the Income Statement

Financing Activities

Cash inflows and outflows related to the issuance and repayment of long-term liabilities and equity

Investing Activities

Cash inflows and outflows related to the purchase and disposal on long-term assets

Cash Flow Statement

Gives a detailed review of how the company's cash was used (outflows) and where the cash inflows came from. I It reconciles the CHANGE IN CASH for the period --> Tells you what activities caused your cash balance to change throughout the year.

Cash Equivalents

Investments with original maturities of three months or less and readily convertible into KNOWN amount of cash (Stock is NEVER this) So near maturity that interest rate changes won't affect their market value - Treasury Bills - Commercial Paper - Certificate of Deposit - Money Market Funds All are interest bearing

The Purpose of the Statement of Cash Flows

Shows the sources and uses of cash A. Focuses on the company's ability to generate cash internally, its management of current assets and current liabilities, and the details of its investments and its external financing. B. The Statement compares cash at the beginning of the period to cash at the end of the period C. For purposes of the cash flow statement, the definition of cash includes cash and cash equivalents.

Eliminate all non-cash items by ADDING them back (or subtracting GAIN from sales) Look at all changes in CA and CL

Summary of how to calc. Operating Activities section of Cash Flow Stmt.

beginning; end

The Statement of Cash Flows compares cash at the _____________ of the period to __________ at the end of the period.

Cash Flow Operations + Cash Flow Investing + Cash Flow Financing

Total Change in Cash =

ADD: Proceeds from issuing Bonds Payable Proceeds from issuing Stock SUBTRACT: (Payment of Cash Dividends) (Pmts. of L-T Debt (principle only)) (Purchase of Treasury Stock)

What does the the indirect method look like for the Financing Activities section of the Cash Flow Stmt.

Look at all changes in L-T Liabilities and SHE

What does the the indirect method look like for the Financing Activities section of the Cash Flow Stmt.

ADD: Proceeds from Sale of PPE Proceeds from Sale of Investments Proceeds from Collection of Note SUBTRACT: (Purchase of PPE using CASH) (Purchase of Intangibles using CASH) (Note Receivable (principle only))

What does the the indirect method look like for the Investing Activities section of the Cash Flow Stmt.

Look at all changes in Long-term assets

What does the the indirect method look like for the Investing Activities section of the Cash Flow Stmt.

Net Income ADD: + Depreciation and amortization exp. + Loss on Sale of PPE SUBTRACT: (Gains from Sales) THEN LOOK AT ALL CHANGES IN CA AND CL + dec. in CA - inc. in CA + inc. in CL - dec. in CL

What does the the indirect method look like for the Operating Activities section of the Cash Flow Stmt.

Change in cash on the balance sheet

What should the Total Change in Cash equal?