After completing chapter 13 you should be able to: Identify characteristics of corporations and their organization, explain characteristics of, and distribute dividends between, ordinary and preference shares, explain the items reported in comprehensive income and equity,. | Statement of Cash Flows Chapter 13 Chapter 13: Statement of Cash Flows Provides information about the cash receipts and cash payments of a business entity during the accounting period. Purpose of the Statement Helps investors with questions about the company’s Ability to generate positive cash flows. Ability to meet its obligations and to pay dividends. Reasons for difference between net income and net cash flows from operating activities. Need for external financing. Investing and financing transactions for the period. The Statement of Cash Flows helps users determine how a company obtains its cash and where the cash is spent. Providing this information helps explain changes in the cash balance from the beginning to the end of the period. While it is important for users to know how much cash a company has, it is also important to know how a company funded it operations. Did it have to borrow money or sell stock to help pay the operating expenses? If so, users need to be aware of this so they can fully assess the cash flow position of the company. Cash flow information is also useful in determining whether a business has sufficient cash to pay its debts, and/or if the business paid dividends during the period. This slide shows a summary of the components of a Statement of Cash Flows. There are three main sections on the statement: operating, investing, and financing activities. The bottom of the statement reconciles the change in cash with the beginning and ending cash balances. The ending cash balance on the Statement of Cash Flows should always equal the cash balance on the Balance Sheet. The Statement of Cash Flows must include the following three sections: Cash Flows from Operating Activities Cash Flows from Investing Activities Cash Flows from Financing Activities Classification of Cash Flows The next few slides will discuss each of the operating, investing, and financing activities sections. + _ Inflows from: Interest and dividends received Sales to customers | Statement of Cash Flows Chapter 13 Chapter 13: Statement of Cash Flows Provides information about the cash receipts and cash payments of a business entity during the accounting period. Purpose of the Statement Helps investors with questions about the company’s Ability to generate positive cash flows. Ability to meet its obligations and to pay dividends. Reasons for difference between net income and net cash flows from operating activities. Need for external financing. Investing and financing transactions for the period. The Statement of Cash Flows helps users determine how a company obtains its cash and where the cash is spent. Providing this information helps explain changes in the cash balance from the beginning to the end of the period. While it is important for users to know how much cash a company has, it is also important to know how a company funded it operations. Did it have to borrow money or sell stock to help pay the operating expenses? If so, users need to be aware of this
