Chapter 14: Statement of Cash Flow Flashcards
What is the aim of the cash flow statement?
- Predict future cash flow
- evaluate management decisions
- show the relationship btw net income & cash flow
Three part of the cash flow
- Operating activities
- Investing activities
- financing activities
Operation activities include
- Revenues & expenses
- Changes in current assets
- changes in current liabilities
Investing activities include
- changes in non-current assets
- how do we use our money
Financing activities include
- changes in non-current liabilities
- changes in equity
-> how do we receive our money
Indirect Method CFO
Net income + Depreciation & Amortisation
+(-) Net loss(gain) on sale of long-term assets
+ (-) Decrease (increase) in current asset (acc. receivable & inventories)
+(-) Increase (decrease) in current liabilities (acc. payable & unearned revenues)
Direct Method CFO
Receipts from customers ( revenue - changes in receivables)
- (COGS + change in inventory - change in ACC. payable)
-> Payment to inventory/suppliers
Direct Method CFI
-(+) Increase (decrease) in PPE
+ depreciation
- (+) Increase (decrease) in investment (change in investment)
- (+) Increase (decrease) notes payables
- (+) Net loss (gain) on sales of long-terms assets
CFF
+ (-) (change in short-term debt+ change in long-term debt)
+(-) increase (decrease) in share capital (change in share capital)
- Dividend (net income - change in retained earnings)
PPE (which activity)
CFI
dividend (which activity)
CFF
Cash (which activity)
none
Acc. receivable (which activity)
CFO
Share Capital (which activity)
CFF
Acc. Payable (which activity)
CFO
