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Chapter 16

Chapter 16. Statement of Cash Flows. Statement of Cash Flows. Mandated by GAAP Accrual vs. Cash Reconciliation between Net Income and cash balance Earnings vs. Cash generation Value creation Exhibit 16-12 page 744. Sources and Uses of Cash. Net Income/Loss Cash and Cash Equivalents

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Chapter 16

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  1. Chapter 16 Statement of Cash Flows

  2. Statement of Cash Flows • Mandated by GAAP • Accrual vs. Cash • Reconciliation between Net Income and cash balance • Earnings vs. Cash generation • Value creation Exhibit 16-12 page 744

  3. Sources and Uses of Cash • Net Income/Loss • Cash and Cash Equivalents • Cash in • Cash out

  4. Operating Activities • Transactions that enter into the determination of net income are generally classified as operating activities • Current assets • Current liabilities • Revenues & Expenses (as Net Income)

  5. Investing Activities • Transactions relating to the acquiring or disposing of non-current assets are generally classified as investing activities • Long-term assets

  6. Financing Activities • Transactions involving creditors or owners of the company are generally classified as financing activities • Long-term liabilities • Stock • Dividends

  7. Analysis • Net increase or decrease in cash flow • From operating activities • From investing activities • From financing activities • Comparison between two years

  8. Methods • Direct Method (Appendix 16A) • Indirect Method • Instructions Exercise 16-5 page 752

  9. Coach Keen Says…. • Review pages 728-735 • Reread pages 736-737 & 741-745 • Read Chapter 16 articles on WebCT • Redo Exercise 16-5 • Attempt homework 16-2 & 16-3 • Quiz problems with answers for Chapters 5 & 6 are uploaded under homework on WebCT

  10. Depreciation & Amortization • Non-cash accounts • Remove from Net Income • Should be removed at the amount recorded as depreciation or amortization expense on operating statement.

  11. Reporting Gross or Net • Operating Activities – Net • Investing Activities – Gross • Financing Activities – Gross

  12. Non-Cash Exchanges • Reported as notes to the statement of cash flows only

  13. Cash-flow Yield • Cash-flow yield: Cash from/used by Operating Activities Net income/loss • Cash flow article

  14. Coach Keen Says…. • Review pages 728-735 • Review pages 736-737 & 741-745 • Read Chapter 16 articles on WebCT • Redo handout problem • Redo Problem 16-14 • Attempt homework 16-7, 16-10 • Extra credit due on Friday • Problem 6-14 page 757

  15. Coach Keen Says…. • Review text material • Review Chapter 16 articles on WebCT • Redo all handouts, quizzes and problems • Redo all homework • Do homework 16-19 • Cash flow discussion due on Friday 03/11 • All quizzes w/ answers are posted under homework on WebCT • Review on Monday, March 21 • Exam II on Wednesday, March 23

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