Chapter 6 Test 1 Flashcards
Statement of Cash Flows
Statement of Cash Flows
Reports the impact of firms operating, investing, and financing activities on cash flows during the period.
How can a profitable firm run out of money?
- Net income for a particular period does not equal cash flow from operations.
- Firms revenue cash inflows and disburse cash outflows because of investing and financing activities.
Cash Equivalents
represent short term, highly liquid investments in which a firm has temporarily placed excess cash.
Three parts to the statement of cash flows
- operating, investing, financing
Cash flow from Operations
can be used to acquire buildings and equipment, pay dividend, retire long term debt, and pay for other investing and finaincing activities.
Cash flow from Investing
acquisition of non current assets
Cash Flow from Financing Activities
i.e. money borrowed
Cash received from Sales of Goods and Services - Cash Paid for Operating GOods and Services =
Cash Flow from Operations
Cash Recieved from Sales of Investment s and Property - Cash paid for acquisition of investments and property =
Cash Flow from Investing
Cash Received from Issue of Debt or Capital Stock - Cash paid for Dividends and Reacquisition of Debt or Capital Stock =
Cash Flow from Financing
Cash Flow from Ops + Cash Flow from Inv. + Cash Flow from Fina =
Net Change in Cash for the Period
Free Cash Flow
Excess cash flow from operations over cash flow used for investing
Direct Method of Presenting Cash Flows
reports the amounts of cash received from customers less cash disbursed to suppliers.
Indirect Method of Presenting Cash Flows
begins with net income for a period and presents a adjustments to net income for revenues and expenses not matched with cash receipts from customers or disbursenment to suppliers.
Cash + Non-Cash Assets =
Liabilities + Shareholder Equity
