Universidad Autónoma del Estado de Hidalgo

Instituto de Ciencias Económico

Administrativas

Contraloría y tesorería

Statement
of Cash Flows
Ivonne Rubio Blancas
Grupo: 1 Semestre: 8


INTRODUCTION

The balance sheet, income statement, and retained earnings

statement do not always show the whole picture of the financial
condition of a company or institution. In fact, looking at the financial
statements of some well-known companies, a thoughtful investor
might ask questions like these:
How did Eastman Kodak finance cash dividends of $649 million in a
year in which it earned only $17 million?
 Usefulness and Format Indirect Method Using Cash Flows to evaluate a
company

Usefulness Step 1: Operating activities Free cash flow

Classifications Step 2: Investing and financing
Significant noncash activities activities
Format Step 3: Net change in cash
Preparation
Indirect and direct methods

Statement of Cash Flows

 USEFULNESS OF
THE STATEMENT OF CASH FLOWS

The statement of cash flows reports the cash receipts, cash

payments, and net change in cash resulting from operating,
investing, and financing activities during a period. The
information in a statement of cash flows should help
investors, creditors, and others assess:
 Asses

The entity's ability to The entity's ability to pay

generate future cash dividends and meet
flows

obligations

By examining relationships Employees, creditors, and

between items in the statement of
cash flows, investors can make
predictions of the amounts, timing,
and uncertainty of future cash
flows better than they can from
stockholders should be particularly
interested in this statement,
because it alone shows the flows of
cash in a business.

accrual basis data.

 Asses
The reasons for the
difference between net
income and
net cash during the
period.
Net income provides information on
the success or failure of a business
enterprise. However, some financial
statement users are critical of
accrual-basis net income because
itability of the number.
The cash investing and
financing transactions
By examining a company's
investing and financing
transactions, a financial statement
reader can better understand why
assets and liabilities changed during
the period.

 Classification of Cash Flows

Classifies cash receipts and cash payments as operating,

investing, and financing activities. Transactions and other
events characteristic of each kind of activity are as follows:

OPERATING INVESTING FINANCING

ACTIVITIES ACTIVITIES ACTIVITIES
 Classification of Cash Flows

OPERATING INVESTING FINANCING

ACTIVITIES ACTIVITIES ACTIVITIES

Include the cash Include acquiring and Include obtaining

effects of disposing of cash from issuing
transactions that investments and debt and repaying
create revenues and property, plant, and the amounts
expenses. equipment, and borrowed, and
lending money and obtaining cash from
collecting the loans. stockholders, and

paying dividends.

 Operating activities
Cash inflows:
From sale of goods
From interest received and
dividends received.
Cash outflows:
To suppliers for inventory.
To others for expenses.
Types of cash inflows and
Investing activities
Cash inflows:
From sale of property, plant,.
From sale of investments in
debt
Cash outflows:
To purchase property, plant.
To make loans to other
entities.
outflows
Financing activities
Cash inflows:
From sale of common stock.
From issuance of long-term
debt
Cash outflows:
To stockholders as dividends.
To redeem long-term debt or
reacquire capital stock
Significant Noncash Activities

Not all of a company's significant activities involve cash. Examples of

significant noncash activities are:
1. Direct issuance of common stock to purchase assets.
2. Conversion of bonds into common stock.
3. Direct issuance of debt to purchase assets.

Companies don't report in the body of the statement of cash flows

significant financing and investing activities that do not affect cash.
Instead, they report these activities in either a separate schedule at
the bottom of the statement of cash flows or in a separate note or
supplementary schedule to the financial statements.