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The Cash Flow Statement
Transcript of The Cash Flow Statement
Objectives Purpose of the
Cash Flow Statement Cash Flow
Components Two Methods 1. Predicts Future Cash Flows 1. Operating Indirect 2. Evaluates Management Decisions 3. Determines the Ability to Pay Dividends
and Interest 4. Shows the Relationship of Net Income to
Cash Flows Beg. Balance
Sheet End. Balance
Sheet December 31, 2012 December 31, 2013 Income
(Profit and Loss) Cash Flow
Statement January 1 to December 31, 2013 What is a Cash Flow Statement? 2. Investing 3. Financing Your day-to-day operations that creates revenues, expenses, gains, and losses (Net Income)
Adjustments for Non-cash Items
"Changes in Working Capital"
- Current assets (from the Balance Sheet)
- Current liabilities (from the Balance Sheet) Activities that increase or decrease capital assets available to the business.
Purchase of computers
Sale of vehicles
Collections of loans
Loans to others Activities that obtain from investors and creditors the cash needed to launch and sustain the business.
Paying off loans
Obtaining loans Direct The "Reconciliation" method starts with net income and reconciles to cash flows from operating activities (most commonly used). A list of the major categories of operating cash receipts and cash payments. Example: The Indirect Method Any Questions? Example #2 Example #1