Cash Flow Statements and Their Formats

Question 1

Two Types of Cash

Answer 1

Operating Cash and Long Term Cash Flow

Question 2

Operating Cash - Cash Cycle

Answer 2

Operating cycle cash moves from inventory to receivables to cash.. The operating cycle cash releases cash temporarily and does not depend on any injection of new cash.

Question 3

Long Term Cash Flow - Cash Flow Cash

Answer 3

Comes from profits the permanent improvement in asset efficiently the sale of non-current assets, or additional investments.

Question 4

Two Cash Flow Statement a Company May Elect to include in Financial Statements

Answer 4

SFAS 95 Direct and SFAS 95 Indirect

Question 5

SFAS 95 Direct

Answer 5

Starts at the top of the Income Statement with Sales and recast accrual expenses to cash outlays to arrive at cash profit.
Includes Supplemental disclosures of operating cash flow.

Question 6

UCA Direct

Answer 6

Not Allowable by GAAP
Improves Direct Methods usefullness in assessing debt service ability.
Indetifies interest expense and CPLTD as separate cash flow requirements after it calculates Cash Flow from Operations

Question 7

SFAS 95 Indirect Statement

Answer 7

Starts at the bottom of income statements and adjusts to reconcile with changes in cash. Focuses on differences between net profit and net cash flow fro operations. Is required by GAAP as it contains supplemental disclslure of operating cash flow. Provides supplemental information that support repayment including interest payments, can payments for income taxes, non-cash financing for investing transactions

Question 8

Compare UCA Direct and SFAS Direct

Length

Answer 8

UCA includes more details
SFAS relies on disclosure that reconcile net income to net operating cash flow.
Dscilosure provided in supplemental

Question 9

Compare UCA Direct and SFAS Direct - Interest and Taxes

Answer 9

UCA - Changes in Non-current Liabilities are segregated as miscellaneous cash outlays
Includes Miscellaeous Outlay with Cash Taxes paid in a separate section within Operating Cash flow.
Provides a segrated section to measure financing costs, including dividends, before arriving at net cash income.
SFAS-Includes Interest and cash taxes in operating cash flow.

Question 10

Compare UCA Direct and SFAS Direct - Loan Principal Payments

Answer 10

UCA - discloses long-term debt repaid in cash after amortization, which follows Net cash income.
SFAS - Consolidates financing activities into one section, Net Cash Provided by Financing Activities.

Question 11

Compare UCA Direct and SFAS Direct - Loan Payment Priority

Answer 11

UCA Cash flow Islolates operating cash flow before considering capital expenditures. giive CPLTD a priority before capital expenditures
SFAS - Measures all changes in debt and equity at one time, including current and long term portions of the the company’s loans.
SFAS accounts for Capital Expenditures before debt, making it harder to verify the company paid debt before capital expenditures.

Question 12

Compare UCA Direct and SFAS Direct - Similarities

Answer 12

Compensate for disadvantages of accural accounting.
Separate the cash flow from operating, investing, and financing activities
Separates internal from external sources and uses of cash flow
Reconciles the net result of operating and investing cash to the net change in the cash.

Question 13

Compare UCA Direct t SFAS Indirect Cash Flow Statements - Adjusting for Depreciation and Amortization

Answer 13

SFAS adds back depreciation and amortization expense as cash

UCA removes noncash expense by showing them as sources of cash.

Question 14

Compare UCA Direct SFAS Indirect Cash Flow Statements - Balance Sheet Accounts

Answer 14

Both statements measure cash impact of changes in balance sheet items. On the SFAS statemetns Balance sheet items are under Reconciling Items.
The UCA captures receivable as an adjustment to accrual basis revenue.

Question 15

Compare UCA Direct SFAS Indirect Cash Flow Statements - Accounting for Income

Answer 15

SFAS starts with net income, so there is no need show individucal income and expensee accounts.
UCA statements included relavent income statement accounts

Question 16

Compare UCA Direct SFAS Measuring Year to Year Changes In Receivables

Answer 16

SFAS measures the change in net AR by combining Gross Receivables and Allowance for Bad Debt

Combines Gross Receivable and Allowance for Bad Debt in one account, Change In AR

Question 17

Compare UCA Direct SFAS Interest & Taxes

Answer 17

SFAS Includes changes in interest payable in both deferred tax assets and tax liabiities
UCA - details cash taxes and cash interest expense paid by placing the expenditures after Cash after Operations but before Capital Expenditures

Question 18

Compare UCA Direct SFAS - Loan Payment Priority

Answer 18

SFAS- Does not dispay the company’s principal payments on its debts, does not give a higher priortiy cash outlay than capital expenditures
UCA - Priorities CPLTD over capital expenditures

Question 19

Compare UCA Direct - Similarities

Answer 19

Both formats compensate for accural accounting
Separate operating, investing and financing activites
Separate internal fro external sources and uses of cash
Allow you to reconcile net effect of operating and investing cash flow to year to year change in cash.

Question 20

What is Operating Cash Flow

Answer 20

Mesure of cash provided throug company operatinns. Cash ecquivalent of income statement’s profit.

Question 21

Investing Cash Flow

Answer 21

Cash flows from investment activies, such as buying or selling plant and equipment, intangible assets, rental properties, and stock in affiliates or subs.
Changes in marketable securities when the securities are considered an investment instead of cash equivalent

Question 22

Financing Cash Flow

Answer 22

Changes in debt in equity
Long or short-term sources evidenced by a note or debt instrument
Does not include retained earnings

Question 23

Operating Cash Flow Profit

Answer 23

Provides te potential for operating cash flow because the cash cycle interupts the seamless conversion of profit to actual cash.

Question 24

Operating Cash: Cash Cycle

Answer 24

The second way a company generates operating cash is the cash cycle, movement of cash within the company.

Question 25

The Cash Cycle

Answer 25

of Days Sales in Receivable + Days COGS in Inventory - Days Purchases in inventory

Question 26

How Is Operating Cash Flow Shown on SFAS Direct.

Answer 26

Net Cash Provided By Operations

Question 27

How is Operating Cash Shown on UCA Cash Flow Statement

Answer 27

In Four Steps:
Gross Cash Profit: The Cash Equivalent of Gross Profit

Cash After Operations: The Cash
Equivalent of Operating Profit

Net Cash After Operations: Cash The
Equivalent of Net Profit except it excludes
interest expense

Net Cash Income: Equivalent of Net Profit After Taxes

Question 28

Positive or Negative Investing Cash Flow will depend on where the company is in the in the Business life Cycle

Answer 28

Growing Companies will have negative
Mature Companies with have both proceeds and uses of cash
Declining Companies will have positive cash flow from Investing.

Question 29

Investing Cash Flow on SFAS Direct

Answer 29

Net Cash Provided By Investing Activities

Question 30

Investing Cash Flow on UCA

Answer 30

Expenditures Grouped Together May Include Cash for Capitql Expenditures or Cash for Plant and Equipment

Question 31

Investing Cash Flow on SFAS Indirect

Answer 31

Net Cash Provided by or Used in Investing

Question 32

Financing Cash Flow

Answer 32

Includes Sources of external Funds Does not include profit or loss.

Question 33

Financing Cash Flow Shows

Answer 33

The amount of cash need to meet any investing cash needs not provided by operating cash flow. Cash flow statement cannot tell you how much the company borrower or repaid during the year.

Question 34

Financing Cash Flow on SFAS Direct

Answer 34

Reflected as Net Cash Provided by Financing Activities or Net Cash Provided by Financing
Measures Change in LTD, including CPLTD

Question 35

Financing Cash Flow on UCA Statement

Answer 35

CPLTD is handles in a separate section from other financing cash flows. Will need to add to match the other formats

Question 36

Financing Cash Flow on SFAS Indirect

Answer 36

Reflected as Net Cash Provided by Financing Activities or Net Cash Provided by Financing
Measures Change in LTD, including CPLTD

Question 37

Gross Cash Profit

Answer 37

Cash From Sales - Cash Production Costs

Question 38

Gross Cash Margin

Answer 38

Gross Cash Profit / Net Sales

Question 39

Cash Coverage Ratio

Answer 39

Net Cash After Operations / Financing Costs + CPLTD

Question 40

Financing Surplus Requirement

Answer 40

Capital Expenditures and Long -term Investments are Group together

Question 41

Calculate Anticipated Net Fixed Assets

Answer 41

Year 1 Net Fixed Assets - Year 2 Depreciation

Question 42

Fixed Asset Expenditures

Answer 42

Actual Fixed Assets - Anticipated Net Fixed Assets