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* Why is using cash as a base of measurement problematic for financial reporting? * Why would owner’s prefer the money reinvested and not received as dividends? * Accounting choices can make the information difficult to compare company’s on it’s surface Initial Questions about the Statement of Cash Flows What is the usefulness of the statement of cash flows? Do the balance sheet and income statement provide sufficient cash flow information? What types of information are disclosed in the statement of cash flows and why are they important? What kinds of activities are reported in each of the operating, investing and financing sections of the statement of cash flows? How is this information useful? Is it important for a company to report net cash inflows (positive amounts) relating to operating activities over the longer term? What are the implications if operating cash flows are negative for an extended period of time? * Initial Questions about the Statement of Cash Flows continued Why is it important to know the composition of a company’s investment activities? What kind of information might we look for? Are positive investing cash flows favorable? Is it important to know the sources of a company’s financing activities? What questions might that information help us answer? How might the composition of operating, investing and financing cash flows change over a company’s life cycle? Is the bottom line increase in cash flow the key number? Why or why not? * Financial Statement Linkages The income statement and the balance sheet are linked via retained earnings. Retained earnings, contributed capital, and other equity balances appear both on the statement of stockholders’ equity and the balance sheet. The statement of cash flows is linked to the income statement as net income is a component of operating cash flow. * Financial Statement Linkages for Berkshire Hathaway The income statement and the balance sheet are linked via retained earnings. For Berkshire Hathaway