Acct 201: Chapter 12. The statement of cash flows

What are cash flows from investing activities?

Investing activities are the buying and selling of fixed assets and other corporations' securities. 1. Fixed assets include land, equipment, and buildings. 2. Corporation securities include both bond and common stock. - Investing activities include cash inflows from the sale of fixed assets and debt of other entities. It also includes cash outflows to purchase fixed assets and debt of other entities.

What are cash flows from financing activities?

Financing activities are the company's transactions with its financial creditors and stockholders. 1. Financing creditor transactions refer to borrowing and repaying bankers or bondholders. 2. Financing Stockholder transactions refer to issuing common stock to investors and the payment of dividends. - Financing activities include cash inflows from issuance or sale of common and preferred stock and borrowing via debt (bonds and notes payable). It also includes the cash outflows to shareholders for dividends and creditors to repay long-term debt.

Why are investors/Stockholders interested in a company's cash flows?

The primary focus for investors is on cash from operating activities to generate sufficient cash to pay dividends and purchase more fixed assets to remain competitive. Investors are interested in evaluating a company's future cash flows from operations. So, all information about past cash flows may be useful to predict future cash flows.

What are the three key sections of a statement of cash flows?

The statement of cash flows reports the cash inflows and outflows for operating, financing, and investing activities

What are cash flows from operating activities?

They focus on a company's primary business purpose: - Operating activities report the cash effects from transactions that determine net income. Operating activities includes cash inflows from sale of goods or servicies performed, interest income, and dividend income; and cash outflows to suppliers for inventory, employees for services, government for taxes, lenders for interest, and other expenses.