The contents of this chapter include all of the following: Indicate the primary purpose of the statement of cash flows; distinguish among operating, investing, and financing activities; explain the impact of the product life cycle on a company’s cash flows; | Statement of Cash Flows Revisited PART III: Decision Tools Lecture 26 Describe the purpose of the statement of cash flows. Identify the major classifications of cash flows. Differentiate between net income and net cash flow from operating activities. Contrast the direct and indirect methods of calculating net cash flow from operating activities. Determine net cash flows from investing and financing activities. Prepare a statement of cash flows. Identify sources of information for a statement of cash flows. Discuss special problems in preparing a statement of cash flows. Explain the use of a worksheet in preparing a statement of cash flows. Learning Objectives Preparation of the Statement Special Problems in Statement Preparation Use of a Worksheet Usefulness Classification of cash flows Format of statement Steps in preparation Examples Sources of information Indirect vs. direct method Adjustments to net income Accounts receivable (net) Other working capital changes Net losses . | Statement of Cash Flows Revisited PART III: Decision Tools Lecture 26 Describe the purpose of the statement of cash flows. Identify the major classifications of cash flows. Differentiate between net income and net cash flow from operating activities. Contrast the direct and indirect methods of calculating net cash flow from operating activities. Determine net cash flows from investing and financing activities. Prepare a statement of cash flows. Identify sources of information for a statement of cash flows. Discuss special problems in preparing a statement of cash flows. Explain the use of a worksheet in preparing a statement of cash flows. Learning Objectives Preparation of the Statement Special Problems in Statement Preparation Use of a Worksheet Usefulness Classification of cash flows Format of statement Steps in preparation Examples Sources of information Indirect vs. direct method Adjustments to net income Accounts receivable (net) Other working capital changes Net losses Significant noncash transactions Preparation of worksheet Analysis of transactions Preparation of final statement Statement of Cash Flows LO 1 Describe the purpose of the statement of cash flows. Primary purpose: To provide information about a company’s cash receipts and cash payments during a period. Secondary objective: To provide cash-basis information about the company’s operating, investing, and financing activities. Section 1 - Preparation of the Statement of Cash Flows LO 1 Describe the purpose of the statement of cash flows. Provides information to help assess: Entity’s ability to generate future cash flows. Entity’s ability to pay dividends and meet obligations. Reasons for difference between net income and net cash flow from operating activities. Cash and noncash investing and financing transactions. Usefulness of the Statement of Cash Flows Income Statement Transactions Operating Activities Changes in Investments and Long-Term Asset Items Investing Activities Changes in Long-Term .
