Chapter 14 Flashcards
Reports on a business’ cash
receipts and cash payments for a
specific period
Statement of cash flows
What is the purpose of statement of cash flows
Predict future cash flows
Evaluate management
Predict ability to pay debts
Activities that create revenue or expense in the entity’s business; a section of the statement of cash flows.
Operating activities
Activities that increase or decrease long-term assets; a section of the statement of cash flows.
Investing activities
Activities that increase or decrease long-term liabilities and equity; a section of the statement of cash flows
Financing activities
Investing and financing activities that do not involve cash
Non-cash investing activities
A format of the operating activities section of the statement of cash flows; starts with net income and
reconciles to net cash provided by operating activities.
Indirect method
A format of the operating activities section of the statement of cash flows; lists the operating cash receipts and cash payments.
Direct method
Formula for calulating cash reciept from disposal
= cost - accumulated depreciation + gain - loss
What are the three changes in current assests and liabilities to statement of cash flows
- Increase in current asset other than cash causes a decrease to net income
- A decrease in current asset other than cash causes an increase adjustment to net income
- An increase in current liability causes an increase to net income
- Decrease in current liability causes a decrease in net income
Formula for ending retatined earnings
= beginning retained earnings + net income -net loss - dividends
The amount of cash available from operating activities after paying for planned investments in long-term
assets and after paying dividends to shareholders. Net cash provided by operating activities − Cash
payments planned for investments in -term assets − Cash dividends.
Free cash flow
Formula for free cash flow
net cash provided by OA - cash payments planned for investments - cash dividends
