F5 - M5 - Statement of Cash Flows

Question 1

Under the statement of cash flows, what are the two methods to present operating cash flows?

Answer 1

Direct and Indirect, per the lectures, you only need to know how to do the indirect method, but it is important to know there are two methods.

Question 2

What does the operating section of the statement of cash flows look at? What are those?

Answer 2

It looks at the change in operating assets and operating liabilities. See below for what those are:

Operating assets: All current assets except cash and cash equivalents.

Operating liabilities: All non-interest bearing obligations

Question 3

What does the investing section of the statement of cash flows look at?

Answer 3

Cash receipts and disbursements from non-current assets.

Question 4

What does the financing section of the statement of cash flows look at?

Answer 4

Cash receipts, interest bearing debt, and equity.

Question 5

What is the point of the statement of cash flows?

Answer 5

The statement of cash flows shows you the change in cash from your operating, investing, and financing activities. Once you have that, you add that to your beginning balance and that gives you your ending balance, and will reconcile to the cash account on the balance sheet.

Question 6

What is the formula for the indirect method for operating cash flows?

Answer 6

Net income + Noncash expenses/losses - Noncash income/gains + Increases (decreases) in operating liabilities/ (assets) - Increases (decreases) in operating assets/(liabilities).

Question 7

For financing and investing, what are the methods that those can be presented in?

Answer 7

Just direct method and that is it.