Statement of Cash Flows

Question 1

Statement of Cash Flows Includes?

Answer 1

Operating Activities

Investing Activities

Financing Activities

Question 2

What are the types of cash related Operating Activities?

Answer 2

It is cash inflows and outflows from normal operations.

Inflows (cash received)
*From customers
*Dividends (from investments)
*Interest received
*From disposal of trading securities

Outflows (cash paid)
*To suppliers (for goods/services, SG&A, expenses) and employees (payroll)
*Interest paid
*Income taxes
*For the acquisition of trading securities

Question 3

Cash Flow Operating Activities (Indirect Method)

Answer 3

Net Income
Increase NI:
*Depreciation Expense
*Amortization Expense
*Losses on sale of assets

Decrease NI:
*Equity earnings from Investees
*Amortization of Bond Payable
*Gains on sale of assets

Changes in current assets and current liabilities:
-Increase in current assets
+Decrease in current assets

+Increase in current liabilities
-Decrease in current liabilities

=Cash provided or (used) by Operating Activities

Question 4

Investing Activities

Answer 4

Cash inflows and outflows relating to investing in self and others.

Inflows:
*Collection of principal payments on loans made by the company
*Disposal of Long-Term Assets (PP&E, intangibles, AFS debt securities and HTM debt securities)
*Proceeds from corporate-owned life insurance policy
*Certificates of Deposit over 1 yr

Outflows:
*Acquisition of Long-Term Assets (PP&E, intangibles, AFS debt securities and HTM debt securities)
*Major repairs (capitalized) for plant or equipment
*Certificates of Deposit over 1 yr

Question 5

Financing Activities

Answer 5

Cash inflows and outflows from issuing and repaying debt or equity.

Examples:
*Issuance of common or preferred stock
*Treasury stock transactions
*Dividends payments
*Borrowing and repaying debt (principal payments only) bonds payable, notes payable, mortgage payable.