Cash Flow
Statement
CORPORATE
FINANCIAL
REPORTING
·1
Long-Lived Assets
CASH FLOW STATEMENT
Operating activities
xxxx
Investing activities
xxxx
Financing activities
xxxx
Increase (decrease) in cash
Cash, beginning of the year
Cash, end of the year
xxxx
xxx
xxxx
Cash Flow Statement
2
CASH FLOW STATEMENT
Operating activities
normal day-to-day income producing activities (including
buying/selling Trading Securities)
Investing activities
acquiring/disposing of non-current assets (including
buying/selling Securities Available For Sale)
lending and being repaid the principle
Financing activities
borrowing and repaying the principle amount borrowed
all cash transactions with shareholders
Cash Flow Statement
3
CASH FLOW STATEMENT
Companies don’t really prepare cash flow
statements like we did the first day of class.
They use, as much as possible,
a logic based approach.
Cash Flow Statement
4
CASH FLOW STATEMENT
Suppose you saw the following under ASSET
on a company’s balance sheet:
(in $ 000)
2010
10,000
Land
2009
4,000
and under LIABILITIES there were no
liabilities for a land purchase.
What would you surmise happened?
Cash Flow Statement
5
CASH FLOW STATEMENT
Suppose you saw the following under ASSETS on a
company’s balance sheet: (in $ 000)
2010
2009
Land
10,000
4,000
and under LIABILITIES there was:
2010
Mortgage payable for land
5,000
2009
-0-
What would you surmise happened?
Cash Flow Statement
6
CASH FLOW STATEMENT
Suppose you saw the following under ASSETS on a
company’s balance sheet: (in $ 000)
2010
2009
Land
10,000
24,000
and there is no loss from land impairment on the
2020 income statement.
What would you surmise happened?
Cash Flow Statement
7
CASH FLOW STATEMENT
Suppose you saw the following under ASSETS on a
company’s balance sheet: (in $ 000)
2010
2009
Land
10,000
24,000
Nothing about a receivable from sale of land.
And on the 2010 income statement you saw
Gain on land sale
5,000
-
What would you surmise happened?
Cash Flow Statement
8
CASH FLOW STATEMENT
Suppose you saw the following under ASSETS on a
company’s balance sheet: (in $ 000)
2010
2009
Land
10,000
24,000
And on the 2010 income statement you saw
Impairment of land
(14,000)
-
What would you surmise happened?
Cash Flow Statement
9
CASH FLOW STATEMENT
Suppose you saw the following under OWNERS’
EQUITY on a company’s balance sheet: (in $ 000)
Capital stock
Paid in surplus
2010
10,000
14,000
2009
7,000
9,000
What would you surmise happened?
Cash Flow Statement
10
CASH FLOW STATEMENT
For the most part, that is the approach
companies take to prepare cash flow
statements.
Cash Flow Statement
11
CASH FLOW STATEMENT
Warning!
Accounting professors love to put
cash flow statement problems on tests.
Cash Flow Statement
12
CASH FLOW STATEMENT
QUESTIONS?
Cash Flow Statement
13