I. For each of the years on the Statement of Cash Flows:
1. What were the firm’s major sources of cash? Sources of cash: Sales of depreciable assets and sales of discontinued operations in 1990 and increasingly from operating activities, especially related to restructuring and other unusual items.
2. What were the firm’s major uses of cash? Cash comes mainly from payment of debt and investments in depreciable assets.
3. Was cash flow from operations greater than or less than net income? Explain in detail the major reasons for the difference between these two figures. The net income was negative from 1989 to 1991. The net income is negative due to the depreciation costs. Operating…show more content… 7. Were the working capital (current asset and current liability) accounts other than cash and cash equivalents primarily sources of cash, or users of cash? The asset related ones were mainly users of cash: A/R and inventories increased consistently. The liability accounts, A/P, increased as well, thus contributing to cash increase. This is a sign of a healthy growing company.
8. What other major items affected cash flows? In 1991 we see two major accounts causing a major effect in cash: an $8M investment in marketable securities and $23M proceeds from issuance of common stock.
II. What was the trend in:
9. Net income? The net income has been increasing steadily.
10. Cash flow from (continuing) operations? Cash from operations almost doubled from 1989 to 1990. However, it dropped back to the previous level in 1991.
11. Capital expenditures? Capital expenditures have been decreasing 50% every year.
12. Dividends? There are no dividends directly reported in the statement.
13. Net borrowing (proceeds less payments of short- and long-term debt)? Net borrowings have been dropping consistently from being positive in1989 to turning negative the subsequent years.
14. Working capital accounts? Working capital accounts in general have increased in the 3-year period, with some ups and downs on the second year.
III. Based on the evidence in the Statement of Cash Flows alone, what is your
CHAPTER 12 Statement of Cash Flows Study Objectives 1. Indicate the usefulness of the statement of cash flows. 2. Distinguish among operating, investing, and financing activities. 3. Explain the impact of the product life cycle on a company’s cash flows. 4. Prepare a statement of cash flows using the indirect method. 5. Use the statement of cash flows to evaluate a company. *6. Prepare a statement of cash flows using the direct method. Summary of Questions by Study Objectives…
The statement of direct and indirect cash flows are financial statements that companies prepare each month. Both methods report the cash flows differently but in the end each statement will result in the same amount. The operating activities provides a company with financial flexibility to invest in other parts of its business such as purchasing new equipment or paying off debt. Investing activities pertain to making capital expenditures such as new equipment. Financing activities relate to borrowing…
9-193-103 Rev. November 3, 1998 Statements of Cash Flows: Three Examples John Stacey, a sales engineer for Aldhus Corporation, was worried. A flight delay had caused him to miss last week’s accounting class in the evening MBA program in which he had enrolled at the suggestion of the personnel director at Aldhus, a growing manufacturer of computer peripherals. The class he had missed had been devoted to a lecture and discussion of the statement of cash flows, and he was sure the material he had…
19, 2012 The Flow of Cash Flow Statements What are cash flow statements and how does it help us accountants to understand better how cash come and go? In accounting terms, cash flow statements are financial statements that show accountants what changes in the balance sheet and how it affects daily businesses. It is also a tool where we can determine a short-term capability of a company and their ability to pay the bills. Fundamentally, the cash flow statement focuses the flow of cash that goes in…
Accounting 2 Abstract The following is on a new merchandising corporation showing the chart of accounts and cash flow statement, along with information on the type of company the corporation is. In addition there is information regarding what internal controls the company has, how many employees the company has hired. The first month’s transactions are journalized and each account journalized is in the chart of accounts. The Chart of Accounts is used in accounting for companies to track…
Accounting Statements and Ratio Analysis 1. Workshop Plan Aims of the session: To introduce the three main financial statements To evaluate how the financial statements are linked To evaluate the information provided by the financial statements To investigate how to undertake financial analysis and interpretation of accounts Essential reading reference: Chapter 3, McLaney 2. Introduction to the Workshop This workshop provides a brief introduction to the subject of financial accounting that…
Accounting II Introduction to the Statement of Cash Flows and its role and impact in financial reporting Student Name: LinLin Zhang Instructor: Mark Taylor Date: December 11, 2014 [no notes on this page] -1- Introduction to the Statement of Cash Flows and its role and impact in financial reporting 1 Introduction to the Statement of Cash Flows and its role and impact in financial reporting LinLin Zhang [no notes on this page] -2- Introduction to the Statement of Cash Flows and its role and impact…
FI 4020 Flow of Funds and Cash Flow Statements Funds Analysis and Cash-Flow Analysis • Flow of Funds (Sources and Uses) Statement • Accounting Statement of Cash Flows Flow of Funds Statement A summary of a firm’s changes in financial position from one period to another; it is also called a sources and uses of funds statement or a statement of changes in financial position. Has been replaced by the cash flow statement (1989) in U.S. audited annual reports. Why Examine the Flow of Funds Statement…
Week 9 DQ2 "Use of Cash Flows Statements" Please respond to the following: Assess what information may be revealed about the sustainability of a company by review and analysis of a company’s statement of cash flows that may not be revealed in the balance sheet or income statement. Provide support for your rationale. Create an argument indicating that the statement of cash flows contains the most valuable information related to a company’s performance for users of financial statement information. Provide…