M8- Cash Flow Statement Flashcards
What is the preferred method of cash flow
Direct method
What is the direct method?
Direct method= cash collected - cash from opex
Direct method- what items are not included in operating activities?
Net income
Depreciation
Gains and Losses
Direct Method: What items are included as inflows for operating expenses
- Cash from customers (req calculation)
- Interest rec
- Dividends rec
- Sale of trading security
- Other (insurance/law suits)
Direct Method: Operatiooooooong activity outflows
- paid to suppliers/vendors (req calc)
- interest paid
- income taxes paid
- cash paid to acquire securities (Trading securities)
- Other operating expenses (Req. calculation)
What is the indirect method
Reconciliation
= NI + Deprecciation + losses - gains
Indirect method; what is not included in the calculation of oepraitng activities
- cash paid to customers
- cash paid to vendors
Indirect method: what is the calculation for operating activities
NI
+ Depreciation
+ Losses
- gains
- Amoritization of bond premiums
- Equity earnings
- (+/-) OA
+ (+/-) OL
what are OA
all CA except cash and cash equivalents
What are OL
all accruals except interest bearing items
What accounts for 85% of the changes to Operating activities for indirect method
CLAD
Current Assets
Liabilities
Amortization/Depreciation
Deferred Items
What is the difference between investing activities for indirect and direct
nothing
what is the difference between direct and indirect financing section
nothing
For investing activities describe the relationsihp between buying and selling
buying– cash goes down
Selling – cash goes up
Describe ther relationsihp between issuing debt and repaying debt under financing method
Issuing debt — inc cash
Repay debt– decrease in cash
What two items impact the calculation for cash from customers
- AR
- Unearned revenue
What is the calculation for cash rec. from customers under the direct method
Revenues
- inc in AR
+ inc in unearned revenues
= Cash from customers
What are the two factors that impcat cash paid to suppliers
- inventory
- AP
What is the calculation for cash paid to suppliers under teh direct method
COGS
+ Inc in Inv
- Inc in AP
= Cash paid to suppliers
What are the factors that impact cash paid to employees
- salaries and wages payable
what is the calculation for cash paid to employees under the direct method?
Salaries and wages expense
- inc in wages payable
= cash paid to employees
what are the factors that impcat othre operating cash payments in the direct method?
- prepaids
- accrued liabilities
What is the calculation for other operating cash payments for the direct method?
Other OpEx
+ Inc in prepaids
- Inc. in accrued liabilities
= other operating cash payments
How are lease payments recorded in the statement of cash flows
- financing- cash outflow- other principal payments
the principal payment is recorded as a financing activity
