Cash Flow Statement ADMN 1107 Distance Ed

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Cash Flow StatementADMN 1107 Distance Ed

• Chapter 5

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Cash Flow Statements

• One of three (3) of the financial statements
• Complements the balance sheet and the income
  statement

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Why is the Cash Flow Statement Important?
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Cash Flow Statement

• Profits different from cash flow
• Short term cash flow deficits can be detrimental
  to certain companies
• Therefore helps to highlight potential cash flow
  issues

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Cash Flow Statements

• Operating Activities
• Investing Activities
• Financing Activities

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Operating Activities

• The only area that differs between the direct and
  the indirect method
• Start with Net Income
• Add Back Amortization
• Gain/Losses on Equipment Sales
• Future Income Taxes

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Investing Activities

• Purchases of equipment
• Sales of Equipment
• Long-term marketable securities

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Financing Activities

• Debt financing
• Debt payments

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Preparing the Cash Flow Statements

• Generally use the Indirect Method
• Start with Net Income
• Add back Non-Cash Items
• Working Capital Items
• Then Financing Items
• Investing Items

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Interpretation

• Need to analyze the cash flow statement
• Make predictions for the future
• Investment tools
• Spending trends

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End