Cash flow statement PDF

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Cash Flow statement

26.2.19

CF from operating activities (CFO) - cash inflows and outflows from core operation CF from investing activities (CFI) - cash inflows and outflows from purchase and of PPE and investments CF from financing activities (CFF) - cash inflows and outflows from external financing sources (issue of debt, reinvestment of debt, issue of stocks, TS, payment of dividends). CFO+CFI+CFF= net increase (decrease) of cash  + beginning balance of cash (Dec 31, previous year)

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1) CFO - Direct method  gross CASH receipts (i.e. revenues from customers, interest revenue, dividend revenue) and payments (i.e. operating expenses -COGS ( or supplies expense), wages and salaries, utilities/services used by company to operate-, income taxes, interest payment, dividend payment) - Indirect method  NI (net income)/net loss +/- adjustments to non-cash items= net cash inflow/outflow from operations A. Recording revenues vs cash receipts

B. Recording expenses vs cash payments

- Cash may be received:

- Cash may be paid:

(1) Before delivery: Cash (+A) Unearned (deferred) revenues (+L) Then, upon delivery: Unearned revenue (-L) Revenue (+R, +SE)

(1) To purchase supplies before being used Supplies (+A)  (Deferred expense) Cash (-A) Then, when supplies used: Supplies expense (+E, -SE) Supplies (-A)

(2) When food is delivered: Cash (+A) Rev (+R, +SE)

(2) for repairs the same day Repairs expense (+E, -SE) Cash (-A)

(3) After delivery: On delivery(Dec 31) : Accounts receivable (+A) Accrued revenue (+R, +SE) On cash receipt (Jan 2)  Cash (+A) AR(-A)

(3) to employees for work in the prior period Wages expense (+E, -SE)  (Accrued expense) Wages payable (+L) Then, when cash is paid to employees: Wages payable (-L) Cash (-A)

2) CFI  Cash Cash In - sale/disposal of PPE - sale or maturity of investments

3) CFF  Cash Cash In - issue stock - borrow/issue bonds

Cash out - purchase PPE - purchase investments (investment revenue: CFO; dividend revenue: CFO)  I/S

Cash out - payment of dividends (on your own stock)  B/S  stockholders’ equity  RE - treasury stocks - repayment of principal/early retirement of debt

A (Cash vs non-cash assets) = L + SE  cash = L + SE – non-cash assets  CFS: ending balance of cash – beginning balance of cash = ∂Cash  ∂Cash = ∂L - ∂non-cash assets CFS: 1) comparative B/S  CFO, CFI, CFF 2) I/S  NI  CFO Item 1. Collect AR 2. Pay AP 3. Prepay rent 4. Pay interest 5. Purchase equipment for cash 6. Sell investments for cash 7. Pay back debt to bank 8. issue stock for cash

CFS Operating O O O Investing I Financing F

Cash effect + + +

Other accounts effects AR (-A) AP (-L) Prepid rent (+A) Interest payable (-L) Equipment (+A) Investment (-A) Notes payable (-L) Common stock (+), APIC (+)

-Part 2: CFS (statement of cash flows) - ∂ in cash  ∂cash = ∂L + ∂SE - ∂non-cash assets - CFO, CFI, CFF CFO  operations (interest revenue, interest payments, dividend statement - direct method  gross cash receipts and payments - indirect method  net income/net loss +- adjustment to non-cash item The two methods have the same final result  CFI  cash  CFF  cash 

CFO 1 net income/net loss  I/S Adjustments to reconcile net income (loss) to CFO: + depreciation and amortization expense - gain on sale of investment (PPE and investments other company) + loss on sale of investment 2 + loss due to asset impairment write-down + loss on early retirement of debt - gain on early retirement of debt + decrease in operating assets (OA) - increases in OA 3 - decreasing in operating liabilities (OL) + increases in OL = net cash provided/used by operations

revenue)  Income I/S ( CFO) + comparative B/S ( CFO, CFI, CFFdividend payments) = CFS

adjustments to non-cash items

Section 2 depreciation & amortization  non-cash expenses  + gain/losses  I/S  avoid double-counting. EXAMPLE: Equipment= $10’000, accumulated depreciation= $4’000, selling cost= $8’000

10’000-4’000= 6’000 (net Book Value)  8’000-6’000= $2’000 gain JE: Cash (+A) 8’000 ( CFI) Accumulated depreciation (-XA, +A) 4’000 Equipment (-A) 10’000 Gain (+G, +SE) 2’000 CFI  cash + sale - purchase free CF = CFO – dividend payments – capital expenditure (PPE)  finance long term growth opportunity CFF issue debt +; retire debt –; borrow cash +; issue stocks +; repurchase stocks – ; pay dividends – (  dividend revenue from investments  CFO)...