In this chapter students will be able to: Describe the purpose and content of the cash flow statement, prepare a cash flow statement using either the indirect or direct method, analyze the cash flow statement. | The Cash Flow Statement Reporting of cash flows Purpose and content of the cash flow statement Preparing the cash flow statement Operating activities Investing activities Financing activities The cash flow statement Using financial statement information Free cash flow Copyright John Wiley & Sons Canada, Ltd. 2 CHAPTER 17: The Cash Flow Statement Describe the purpose and content of the cash flow statement. Prepare a cash flow statement using either the indirect or direct method. Analyze the cash flow statement. Copyright John Wiley & Sons Canada, Ltd. 3 Purpose of the Cash Flow Statement Gives information about: Cash receipts and payments Net change in cash during a period Helps investors, creditors and others understand a company’s: Ability to generate future cash flows Ability to pay dividends and meet obligations Investing and financing transactions during the period Cash provided (used) by operating activities, and how it differs from profit Copyright John Wiley & Sons Canada, Ltd. 4 Content of Cash Flow Statement: Definition of Cash Cash flow statement is prepared using cash and cash equivalents: Highly liquid investments readily convertible to cash, and Very near maturity (usually three months) Companies must give a clear definition of “cash” as it is used in the statement Copyright John Wiley & Sons Canada, Ltd. 5 Content of Cash Flow Statement: Classification of Cash Flows Operating activities: cash effect of transactions that: Create revenues and expenses Relate to changes in noncash current assets and liabilities Investing activities: affect non-current assets: Acquiring and disposing of non-trading investments and long-lived assets, and Lending money and collecting the loans Financing activities: affect non-current liability and shareholders’ equity accounts: Proceeds from issuing and repayment of debt Proceeds from shareholders and payment of dividends Copyright John Wiley & Sons Canada, Ltd. 6 Content of Cash Flow Statement: Significant Noncash . | The Cash Flow Statement Reporting of cash flows Purpose and content of the cash flow statement Preparing the cash flow statement Operating activities Investing activities Financing activities The cash flow statement Using financial statement information Free cash flow Copyright John Wiley & Sons Canada, Ltd. 2 CHAPTER 17: The Cash Flow Statement Describe the purpose and content of the cash flow statement. Prepare a cash flow statement using either the indirect or direct method. Analyze the cash flow statement. Copyright John Wiley & Sons Canada, Ltd. 3 Purpose of the Cash Flow Statement Gives information about: Cash receipts and payments Net change in cash during a period Helps investors, creditors and others understand a company’s: Ability to generate future cash flows Ability to pay dividends and meet obligations Investing and financing transactions during the period Cash provided (used) by operating activities, and how it differs from profit Copyright John Wiley & Sons Canada, Ltd.
