CHAPTER 13STATEMENT OF CASH FLOWS.ppt

ACC1150 - Chapter 13 Questions the Statement of Cash Flow Answers Cash inflows: From sale of goods or services From return on loans (interest received) and on equity securities (dividends received) Cash outflows: To suppliers for inventory To employees for services To government for taxes To lenders for interest To others for expenses Operating Activities - ALERT Some cash flows relating to investing or financing activities are classified as operating activities. For example... Receipts of investment revenue (interest and dividends) and Payments of interest to lenders are classified as operating activities because these items are reported in the income statement. Cash inflows: From sale of property, plant, and equipment From sale of debt or equity securities of other entities From collection of principal on loans to other entities Cash outflows: To purchase property, plant, and equipment To purchase debt or equity securities of other entities To make loans to other entities Cash inflows: From sale of equity securities (companys own stock) From issuance of debt (bonds and notes) Cash outflows: To stockholders as dividends To redeem long-term debt or reacquire capital stock 1. Issuance of common stock to purchase assets. 2. Conversion of bonds into common stock. 3. Issuance of debt to purchase assets. 4. Exchanges of plant assets. Format of the Statement of Cash Flows Three activities: operating investing financing PLUS noncash investing and financing activities Why Report the Causes of Changes in Cash? Statement of Cash Flows Helps Users Evaluate 1. The entitys ability to generate future cash flows. 2. The entitys ability to pay dividends and meet obligations. 3. The reasons for the difference between net income and net cash provided (used) by operating activities. 4. The investing and financing transactions during the period. Statement of Cash Flows Helps Answer the Following Questions How did cash increase when there was a net loss for the per