lecture_final grading period statement of cashflows 3_4_2014.ppt

8/12/2019 LECTURE_FINAL GRADING PERIOD STATEMENT OF CASHFLOWS 3_4_2014.ppt

1/23

1

PowerPoint Presentation by

Gail B. WrightProfessor of Accounting

Bryant University

Copyright 2007 Thomson South-Western, a part

of The Thomson Corporation. Thomson, the Star

Logo, and South-Western are trademarks usedherein under license.

FINANCIAL

ACCOUNTING

2ND

EDITION

BY

DUCHAC, REEVE, & WARREN

13 Statement of

Cash Flows


2/23

2

CASH FLOW STATEMENT

3 sections reporting cash flows

from different activitiesCash flows from operating activities

Cash flows from investing activities

Cash flows from financing activities

LG 1


3/23

3


4/23

4

CASH FLOWS: Operating Activities

Most important cash flows of a business

2 methods

Direct method

Reports operating cash flows as sources, uses ofcash

Indirect method

Reports operating cash by adjusting accrual netincome to cash flows

LG 1


5/23

5

CASH FLOWS: Investing Activities

Cash inflowsfrom investing activities arise

from

Sellingfixed assets, investments, intangible

assets

Cash outflowsfrom investing activities

arise fromBuyingfixed assets, investments, intangible

assets

LG 1


6/23

6

CASH FLOWS: Financing Activities

Cash inflowsfrom financing activities arise

from

I ssuing debt, equity securities

Cash outflowsfrom financing activities

arise from

(Re)Paying dividends, debt, purchasingtreasury stock

LG 1


7/23

7

EXERCISE 13-3a

Press Enter or click left mouse button for answer.

Identify cash flow from operatingactivity.

1. Purchased patents

2. Purchased buildings

3. Purchased treasury stock

4. Sold equipment

5. Net income

6. Issued preferred stock

7. Redeemed bonds

8. Paid cash dividends

9. Sold long-term

investment

10. Issued common stock

11. Issued bonds

LG 1

Clickbutton to

skip this

exercise


8/23

8

EXERCISE 13-3b


Identify cash flow from investingactivity.




4. Sold equipment

5. Net income


7. Redeemed bonds


9. Sold long-term

investment


11. Issued bonds

LG 1

Clickbutton to

skip this

exercise


9/23

9

EXERCISE 13-3c


Identify cash flow from financing activity.




4. Sold equipment

5. Net income


7. Redeemed bonds


9. Sold long-term

investment


11. Issued bonds

LG 1

Clickbutton to

skip this

exercise


10/23

10

NONCASH ACTIVITIES

Arise from investing, financing activities

Examples Issue stock to retire long-term debt

Issue stock, debt in exchange for fixed asset

Has no direct effect on cash flowsDisclosed in separate schedule

LG 1


11/23

11

CASH FLOWS:Direct Method

Direct method

Reports operating cash flows as sources, usesof cash

Adjusts certain income statement items for

changes in current assets, liabilities

LG 3


12/23

12

EXHIBIT 7

Continued

Rundell, Inc. current accounts used for Operating

cash flow under direct method

LG 3


13/23

13

EXHIBIT 7

Rundell, Inc. income statement items used for

Operatingcash flow under direct method

LG 3


14/23

14

DIRECT METHOD:

Cash Received from Customers

Sales adjusted for change accounts receivable

LG 3

G 3


15/23

15

DIRECT METHOD:

Cash Paid for Inventory

Cost of inventory adjusted for changes in

inventory & accounts payable

LG 3

LG 3


16/23

16

DIRECT METHOD:

Cash Paid for Operating Expenses

Operating expenses adjusted for changes in

accrued expenses

LG 3

LG 3


17/23

17

DIRECT METHOD:

Cash Paid for Income Tax

Income tax expense adjusted for changes in

taxes payable

LG 3

LG 3


18/23

18

EXHIBIT 8

LG 3

LG 4


19/23

19

CASH CONVERSION CYCLE

Cash conversion cycle

Measures the cycle of Buying inventory

Paying for inventory (account payable)

Selling inventory

Collecting account receivable

LG 4

LG 4


20/23

20

CASH CONVERSION CYCLE:

Equation

Days sales in A/R = A/R / Ave daily net Sales

+Days sales in inventory = Ave. Inv. / Ave CGM

-Days sales in A/P = Ave. A/P /Ave CGM

LG 4

LG 4


21/23

21

CASH CONVERSION CYCLE:

Calculation

Apple Dell

# Days SalesReceivables 34 30

Inventory 5 4

Accounts Payable Conversion Cycle

?

LG 4

LG 4


22/23

22

ANALYSIS: Cash Conversion Cycle

The more positive the conversion cycle, theless efficient the operations

Reduces amount of noncash current assetsIncreases level of current liabilities

Releases cash for other purposes

Negative cycles indicate highly efficient usenoncash working capital

LG 4


23/23

23

Inspiration of the Day

"To do carefully and constantly and

kindly many little things is not a little

thing"- Author Unknown

lecture_final grading period statement of cashflows 3_4_2014.ppt

Documents