Statement of Cash Flows Flashcards
What is the purpose of the statement of cash flow?
One of the most important financial statements. Assess past ability to generate and control cash inflows and outflows (where is the cash coming from)
Assess the ability to generate future cash to meet future obligations for debt or dividends.
T/F: The statement of cash flows is required under GAAP?
TRUE
What accounts comprise cash for the SCF?
Cash- Coins, currency, and foreign currency
Cash equivalents- Short-term liquid investments, readily convertible, maturity is less than 90 days.
Restricted Cash- Cash that is set aside for special purposes (designated for special projects)
What are the three categories on the Statement of Cash Flows:
Operating Activity
Investing Activity
Financing Activity
What other information is required on the statement of cash flows?
1) Effects of foreign currency translation
2) Reconciliation of cash at the beginning of the year to cash at the end of the year
3) If the company uses the direct method, you need report a reconciliation of accrual income to cash from operations
4) Non-Cash Transactions
Which of the following information should be disclosed as supplemental information in the statement of cash flows?
- Cash flow per share
- Conversion of debt to equity
Only Conversion of debt to equity: This would appear in the supplemental non-cash disclosure schedule
What is the primary purpose of the SCF?
Provide information about cash receipts and disbursements of an enterprise during the year
Tool: What is the equation to calculate increases and decreases in accounts for this statement?
Cash= L + E - change in other assets
If a company issues both a balance sheet and an income statement with comparative figures, a statement of cash flows should ….
should be issued for each period for which an income statement is presented.
T/F: The investing and financing sections of the SCF are the same regardless of whether the direct or indirect method is used?
True
What is included in operating activities- direct method?
THINGS THAT IMPACT THE INCOME STATEMENT!
Cash inflows:
- From Customers
-Interest income or dividend income
-Sale of debt securities classified as trading
Cash outflows:
- To suppliers
- To Employees
- To government
- Purchases of debt securities
What additional step do you need to do if you use the direct method?
Reconciliation of Operating Activities from Net Income
What items are included in Investing Activities:
Cash Inflows:
- Sale of PPE
- Sale of debt or equity securities of other entities
- Collection of loan principal
Cash outflow:
- Purchase of PPE
- Purchase of debt or equity securities
What items are included in financing activities:
Cash inflows:
- From sale of equity securities
- From issuance of debt (bonds and notes)
Cash outflows:
- Dividends
- Redeem long-term debt
- Re-acquire capital stock
Do accruals impact the statement of cash flows?
No, because the accrual will be paid in a subsequent period.
