Chapter 13 - Statement of cash flows. This chapter’s objectives are to: discuss the usefulness and format of the statement of cash flows, prepare a statement of cash flows using the indirect method, analyze the statement of cash flows. | Learning Objectives Statement of Cash Flows 13 Discuss the usefulness and format of the statement of cash flows. 1 Prepare a statement of cash flows using the indirect method. 2 Analyze the statement of cash flows. 3 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 provided (used) by operating activities. Cash investing and financing transactions during the period. Usefulness of the Statement of Cash Flows LO 1 LEARNING OBJECTIVE Discuss the usefulness and format of the statement of cash flows. 1 Income Statement Items Operating Activities Changes in Investments and Long-Term Asset Items Investing Activities Changes in Long-Term Liabilities and Stockholders’ Equity Items Financing Activities Classification of Cash Flows LO 1 Operating activities—Income statement items Cash inflows: From sale of goods or services. From interest received and dividends received. Cash outflows: To suppliers for inventory. To employees for wages. To government for taxes. To lenders for interest. To others for expenses. LO 1 Illustration 13-1 Typical receipt and payment classifications Classification of Cash Flows Investing activities—Changes in investments and long-term assets Cash inflows: From sale of property, plant, and equipment. From sale of investments in debt or equity securities of other entities. From collection of principal on loans to other entities. Cash outflows: To purchase property, plant, and equipment. To purchase investments in debt or equity securities of other entities. To make loans to other entities. LO 1 Illustration 13-1 Typical receipt and payment classifications Classification of Cash Flows Financing activities—Changes in long-term liabilities and stockholders’ equity Cash inflows: From sale of common stock. From issuance of debt (bonds and notes). Cash outflows: To stockholders as dividends. To redeem long-term . | Learning Objectives Statement of Cash Flows 13 Discuss the usefulness and format of the statement of cash flows. 1 Prepare a statement of cash flows using the indirect method. 2 Analyze the statement of cash flows. 3 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 provided (used) by operating activities. Cash investing and financing transactions during the period. Usefulness of the Statement of Cash Flows LO 1 LEARNING OBJECTIVE Discuss the usefulness and format of the statement of cash flows. 1 Income Statement Items Operating Activities Changes in Investments and Long-Term Asset Items Investing Activities Changes in Long-Term Liabilities and Stockholders’ Equity Items Financing Activities Classification of Cash Flows LO 1 Operating activities—Income statement items Cash inflows: From sale of goods or services. From interest received and
