Statement of Cash Flows Flashcards
What are the cash receipts and disbursements from for operating, investing, and financing cash flows?
1) Operating Cash Flows
- Transactions reported on the income statement
- Current assets and current liabilities
2) Investing Cash Flows
- Noncurrent Assets
3) Financing Cash Flows
- Debt
- Equity
What are inflows of operating activities?
1) Cash received from customers
2) Interest received
3) Dividends received
4) Insurance proceeds
5) Sale of trading securities
What are outflows of operating activities?
1) Cash paid to supplies
2) Interest paid
3) Income taxes paid
4) Cash paid to acquire trading securities
5) Rent, insurance, marketing.
How to calculate cash received from customers - operating inflow?
The change in accounts receivable and the change in unearned revenue.
Like Accrual to Cash Basis
Assets get treated inversely, Liabilities are treated the same as there increase or decrease.
Revenues
- Increase in accounts receivables (asset)
+ Decrease in receivables (asset)
+ Increase in unearned revenue (liability)
- Decrease in unearned revenue (liability)
= Cash received from customers
If A/R goes down that means you are collecting money, so you add cash inflow.
If A/R goes up that means you have booked the revenue under accrual basis but you don’t have the money so you have to subtract.
If unearned revenue goes up you add because you have the money.
If unearned revenue goes down you subtract because you booked cash in prior period.
How to calculate cash paid to suppliers - operating outflow?
The change in inventory and the change in accounts payable.
Like Cash to Accrual Basis
Assets are treated the same as there increases or decrease, Liabilities are treated inversely.
COGS \+ Increase in inventory - Decrease in inventory - Increase in accounts payable \+ Decrease in accounts payable = Cash paid to suppliers.
If inventory increases, you are paying money.
If inventory decreases, you are getting money.
If accounts payable increases, means you owe more people, no cash has been paid, so you add.
If accounts payable decreases, means you’ve paid people, recognized the expense already and need to reverse by adding it.
How to reconcile indirect method?
Net Income - “accrued inflow”
+ Depreciation & amortization (discount) *noncash expense so add back
+ Losses *not from core business so add back losses
- Gains & amortization (premium) not from core business so subtract
- Equity earnings affiliatesnot cash received so subtract
- Operating assets increase *buying inventory
+ Operating assets decrease *selling inventory
+ Operating liabilities increase *borrowing debt
- Operating liabilities decrease *repaying debt
=CFO
Where are gains and losses sale of noninventory located?
Gains are subtracted and Losses are added to indirect method of operating activities.
Where are proceeds on sale from noninventory located?
Investing Activities
What are cash outflows for investing activities?
1) Making loans to other entities
2) Purchasing trading securities (IF NON-CURRENT), available-for-sale securities, and held-to-maturity investments
3) Acquiring property, plant, and equipment.
4) Acquiring another entity using cash
What are cash inflows for investing activities?
1) Disposing of trading securities (IF NON-CURRENT), available-for-sale securities, and held-to-maturity investments
2) Disposing of property, plant, and equipment
Define investing activities?
Change in Non-Current Assets
- If any asset goes up, you buy so that is outflow
- If any asset goes down, you sell so that is inflow
Define financing activities?
Change in interest bearing Debt & Equity
What are cash outflows for financing activities?
1) Paying dividends and repurchasing stock
2) Payment of principal *NOT Interest
What are cash inflows for financing activities?
1) Obtaining resources from owners, such as issuing stock - Common Stock
2) Obtaining resources from creditors, such as issuing bonds, notes, and other borrowings.
What are the differences between U.S. GAAP and IFRS for reporting cash flows.
U.S. GAAP Interest Received - Operating Interest Paid - Operating Dividends Received - Operating Dividends Paid - Financing Taxes Paid - Operating
IFRS
Interest Received - Operating or Investing
Interest Paid - Operating or Financing
Dividends Received - Operating or Investing
Dividends Paid - Operating or Financing
Taxes Paid - Operating, Investing, Financing
