【正文】 C14 1 Learning Objectives Power Notes 1. Purpose of the Statement of Cash Flows 2. Reporting Cash Flows 3. Statement of Cash Flows – The Indirect Method 4. Statement of Cash Flows – The Direct Method 5. Financial Analysis and Interpretation Chapter F14 C14 Statement of Cash Flows C14 2 ? Cash Flow Basics ? Statement of Cash Flows – Two Methods ? Changes in Current Accounts ? Statement of Cash Flows – Indirect Method ? Statement of Cash Flows – Direct Method ? Free Cash Flow Slide Power Note Topics 3 20 31 34 39 62 Note: To select a topic, type the slide and press Enter. Power Notes Chapter F14 Statement of Cash Flows C14 3 Reporting Cash Flows 1. Operating activities – transactions that affect ine. 2. Investing activities – transactions that affect noncurrent assets. 3. Financing activities – transactions that affect equity and debt of the entity. The statement of cash flows reports a firm’s major cash inflows and outflows for a period. Cash flows are reported by three types of activities. C14 4 Cash Flows Increases in Cash Decreases in Cash Cash C14 5 Cash Flows Increases in Cash (receipts from revenues) Decreases in Cash Operating Cash C14 6 Cash Flows Increases in Cash (receipts from revenues) (payments for expenses) Decreases in Cash Operating Operating Cash C14 7 Cash Flows Increases in Cash (receipts from revenues) (payments for expenses) (receipts from sales of noncurrent assets) Decreases in Cash Operating Investing Operating Cash C14 8 Cash Flows Increases in Cash (receipts from revenues) (payments for expenses) (receipts from sales of noncurrent assets) (payments for aquiring noncurrent assets) Decreases in Cash Operating Investing Operating Investing Cash C14 9 Cash Flows Increases in Cash (receipts from revenues) (payments for expenses) (receipts from sales of noncurrent assets) (receipts from issuing equity and debt securities) (payments for aquiring noncurrent assets) Decreases in Cash Operating Investing Financing Operating Investing Cash C14 10 Cash Flows Increases in Cash (receipts from revenues) (payments for dividends, and redemption of debt securities) (payments for expenses) (receipts from sales of noncurrent assets) (receipts from issuing equity and debt securities) (payments for aquiring noncurrent assets) Decreases in Cash Operating Investing Financing Operating Investing Financing Cash C14 11 Cash Flows – Operating Activities Typical cash inflows Typical cash outflows What are some of the typical cash inflows from operating activities? C14 12 Cash Flows – Operating Activities Typical cash inflows Typical cash outflows Interest Revenue Sales of goods and services Dividend Revenue What are some of the typical cash outflows from operating activities? C14 13 Cash Flows – Operating Activities Typical cash inflows Typical cash outflows Sales of goods and services Merchandise purchases Payments of wages other expenses Tax payments Interest Revenue Dividend Revenue C14 14 Cash Flows – Investing Activities Typical cash inflows Typical cash outflows What are some of the typical cash inflows from investing activities? C14 15 Cash Flows – Investing Activities Typical cash inflows Typical cash outflows Sales of fixed assets and other longterm investments Sale of marketable securities and investments What are some of the typical cash outflows from investing activities? C14 16 Cash Flows – Investing Activities Typical cash inflows Typical cash outflows Sales of fixed assets and other longterm investments Sale of marketable securities and investments Purchase of fixed assets and other longterm investments Purchase of marketable securities and investments C14 17 Cash Flows – Financing Activities Typical cash inflows Typical cash outflows What are some of the typical cash inflows from financing activities? C14 18 Cash Flows – Financing Activities Typical cash inflows Typical cash outflows Sales (issuance) of stock Sale (issuance) of bonds and other money market debt Borrowing from banks and other lending institutions What are some of the typical cash outflows from financing activities? C14 19 Cash Flows – Financing Activities Typical cash inflows Typical cash outflows Sales (issuance) of stock Sale (issuance) of bonds and other money market debt Purchase of treasury stock Repayment and redemption of debt (bonds, notes, other) Payment of cash dividends Borrowing from banks and other lending institutions C14 20 Statement of Cash Flows 1. Generate cash flow from operations. 2. Maintain and expand operating capacity. 3. Pay dividends. 4. Pay debts, including interest, when due. 5. Generate future profits. The primary attention is the flow of cash rather than ine. The statement of cash flows is invaluable in assessing the capacity of a firm to achieve goals such as: C14 21 Preparing the Statement of Cash Flows Net cash flows from operating activities will be the difference between the operating cash receipts and operating cash payments. Net cash flows from operating activities is determined by adjusting the accrual ine from operations to reflect a cashbased ine from operations. Direct Method Indirect Method C14 22 Advantages of Using the Direct Method 1. Reports the sources and uses of operating cash receipts and payments. 2. Is easier to understand for many investors. 3. Remended