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Statement of Cash Flows

For reporting purposes. :)
by

Damlouie Valladolid

on 15 December 2013

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Transcript of Statement of Cash Flows

Statement of Cash Flows: Three Examples
Introduction
Aldhus Corporation
a growing manufacturing company of computer peripherals
John Stacey
sales engineer for Aldhus
Lucille Barnes
the assistant controller of Aldhus
Stacey had a delay..
A flight delay caused Stacey to missed his accounting class in the MBA program he was enrolled.
The class he missed had been devoted to a lecture and discussion of cash flows. Although his classmate had faxed him notes, he find it cryptic for anyone to understand.
Stacey called Barnes because of desperation.
With Barnes being delighted with his request, they have agreed to meet that afternoon..
The Story
The Meeting
Operating Activities
shows the inflows and outflows related to the fundamental operations of the basic line or lines of business that is in.
Cash Flow Sections
Financing Activities
shows the cash flows associated with increasing or decreasing the firm's financing.
Investing Activities
shows cash flows for the purchase and sale of assets not generally held for resale and for the making and collecting of loans.
Statement of the Problem
John Stacey who has been enrolled in an MBA program missed his accounting class due to a flight delay. Unfortunately, the class discussion focused on the statement of cash flows. Although his classmate had faxed him some notes, it was too cryptic to be understood by anyone who had missed the class.
He sought help from Lucille Barnes to point him in the right direction. She seemed delighted by Stacey's request. And they have agreed to meet that afternoon.
Statement of cash flows is indeed an essential part of the statements being prepared by the company. It consists of three sections which shows inflows and outflows of cash.
Countries may differ in their approach towards making statements of cash flows. Just like what it was said in the conversation of Barnes and Stacey.
It was discussed in their conversation the two methods cash flow can be presented: the direct and indirect method.
But if you stop short of a full review, you may miss an important part of the story.

- Lucille Barnes
Statement of the Objectives
The objective of the study is to be able to examine and analyze the contents of the statements of cash flow.
The Assignment
What were the firm's major sources of cash? Its major uses of cash?
Was the cash flow from operations greater than or less than net income? Explain in detail the major reasons for the difference between these two figures
Was the firm able to generate enough cash from operations to pay for all of its capital expenditures?
Did the cash flow from operations cover both the capital expenditures and the firm's dividend payments, if any?
If it did, how did the firm invest its excess cash?
Were the working capital (current asset and current liability) accounts other than cash and cash equivalents primarily sources of cash, or users of cash?
What other major items affected cash flows?
If not, what were the sources of cash the firm used to pay for the capital expenditures and/or dividends?
What was the trend in?
Net income
Cash flow from (continuing) operations
Capital expenditures
Net borrowing
Working capital accounts
Dividends
Exhibits
ALPHA CORPORATION
SOURCES
1989
1991
1990
Microsoft Powerpoint
USES
Investment in depreciable assets (Investing)
Proceeds from long-term debt (Financing)
SOURCES
USES
Payment of long-term debt (Financing)
Proceeds from sale of discontinued operations (Investing)
SOURCES
USES
Payment of long-term debt (Financing)
Accounts Receivable (Operating)
What were the firm's major sources of cash? Its major uses of cash?
BETA CORPORATION
SOURCES
1989
1991
1990
USES
Investment in depreciable assets (Investing)
Proceeds from long-term debt (Financing)
SOURCES
USES
Payment of long-term debt (Financing)
Proceeds from sale of discontinued operations (Investing)
SOURCES
USES
Payment of long-term debt (Financing)
Accounts Receivable (Operating)
What were the firm's major sources of cash? Its major uses of cash?
GAMMA CORPORATION
SOURCES
1989
1991
1990
USES
Investment in depreciable assets (Investing)
Proceeds from long-term debt (Financing)
SOURCES
USES
Payment of long-term debt (Financing)
Proceeds from sale of discontinued operations (Investing)
SOURCES
USES
Payment of long-term debt (Financing)
Accounts Receivable (Operating)
What were the firm's major sources of cash? Its major uses of cash?
Full transcript