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Warren
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Duchac
Reporting Cash Flows
(slide 1 of 3)
©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Reporting Cash Flows
(slide 3 of 3)
©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Sources and Uses of Cash
©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Cash Flows from Operating Activities
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Cash Flows from Operating Activities:
The Indirect Method
• The indirect method reports cash flows from operating
activities by beginning with net income and adjusting it for
revenues and expenses that do not involve the receipt of cash
or payment of cash, as follows:
©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Cash Flows from Investing Activities
©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Cash Flows from Financing Activities
• Cash flows from financing activities show the cash inflows and
outflows related to changes in a company’s long-term
liabilities and stockholders’ equity.
• Cash flows from financing activities are reported on the
statement of cash flows as follows:
©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
No Cash Flow Per Share
©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Preparing the Statement of Cash Flows—
The Indirect Method
©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Adjustments to Net Income
©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Preparing the Statement of Cash Flows—
The Direct Method
(slide 1 of 2)
©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Preparing the Statement of Cash Flows—
The Direct Method
(slide 2 of 2)
©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Converting Income Statement to Cash Flows from
Operating Activities using the Direct Method
©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Determining the Cash Received from Customers
©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Determining the Cash Payments for Merchandise
©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Determining the Cash Payments
for Operating Expenses
©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Determining the Cash Payments for Interest
©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Determining the Cash Payments
for Income Taxes
©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Financial Analysis and Interpretation:
Free Cash Flow
(slide 1 of 2)
©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Financial Analysis and Interpretation:
Free Cash Flow
(slide 2 of 2)
©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Appendix: Spreadsheet (Work Sheet) for
Statement of Cash Flows—The Indirect Method
• The steps in preparing this spreadsheet (work sheet) are as follows:
o Step 1. List the title of each balance sheet account in the Accounts column.
o Step 2. For each balance sheet account, enter its balance in the two Balance
columns. Place the credit balances in parentheses.
o Step 3. Add both of the Balance columns, which should total zero.
o Step 4. Analyze the change during the year in each noncash account to
determine its net increase (decrease) and classify the change as affecting cash
flows from operating activities, investing activities, financing activities, or
noncash investing and financing activities.
o Step 5. Indicate the effect of the change on cash flows by making entries in the
Transactions columns.
o Step 6. After all noncash accounts have been analyzed, enter the net increase
(decrease) in cash during the period.
o Step 7. Add the Debit and Credit Transactions columns. The total should be
equal.
©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.