Chapter 12: Statement of Cash Flows

statement of cash flows

The ________ is able to show business activities that make the company’s cash increase or decrease.

cash, cash equivalents, and restricted cash

Cash in the statement of cash flows includes:

Cash equivalents

________ are short term, liquid investments purchased within three months of maturity.

does not change near maturity

Cash equivalents are convertible to amounts of cash and the value of them ________.

Restricted cash

________ must legally be set aside and is not used for day to day operations.

operating, investing, and financing

Cash inflows and outflows correlate to ________ activities.

positive

Cash inflows will be a _________ number.

negative

Cash outflows will be a ________ number.

Revenues and expenses

_________ on the income statement are the result of operating activities.

Operating activities

_________ are day to day activities related to running a business.

examples of operating activities

Collecting money, receiving dividends, and receiving interest are ________.

Net Cash Provided by (used for) Operating Activities

The difference between inflows and outflows are the subtotal of the financial statement (operating) , which is called ________.

current assets and liabilities

Operating activities cause changes in ________.

investments

The purchase and disposal of investments and long lived assets are the result of cash flows from ________.

examples of investing activities

The sale/disposal of equipment and sale/maturity of investments in securities are ________.

Net Cash Provided by (used by) Investing Activities

The difference between inflows and outflows is the subtotal of the financial statement (investing), which is called ________.

financing activities

The exchange of cash with stockholders and cash exchanges with lenders results in cash flows from ________.

examples of financing activities

Borrowing from lenders through formal debt contracts and issuing stock to owners are both ________.

Net Cash Provided by (used in) Financing Activities

The difference between inflows and outflows is the subtotal of the financial statement (financing).

non-current liabilities or stockholders’ equity

Financing activities cause changes in ________ accounts.

comparative balance sheets

The statement of cash flows use _________, which uses the beginning and ending balances to calculate the cash flows from activities.

complete income statements

The statement of cash flows uses ________ to help calculate cash flows for operating activities.

Additional data

________ is used in the statement of cash flows to show the affects of investing and financing activities.

non-cash

Assets are split into cash and ________ assets.

Change in cash = Change in (Liabilities + Stockholders’ Equity - Non cash Assets)

In this statement, the basic accounting equation (Assets = Liabilities + Stockholders’ Equity) is split to create the equation _______. The change in cash between the beginning and end of the year must be equal to the right side.

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Equation to calculate the change in balance sheet accounts:

determine the change in each balance sheet account

The first step to the create the statement is to ________.

identify the cash flows category to which each account relates

The second step to create the statement is to ________.

summarize operating, investing, and financing activities

The last step to creating the statement is to make schedules that ________.

Direct method and Indirect method

The two types of reports for operating cash flows:

direct method

The ________ reports the total cash inflow or outflows from each major transaction.

indirect method

The ________ eliminates the effects of items that don’t involve cash and includes items that do have cash effects.

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Equation to calculate net cash flow provided (used in) operating activities:

Cash

________ is found at the bottom of the Statement of Cash Flows.

Net income

________ is changed into operating cash flows.

Accounts Receivable

An increase in ________ indicates sales on accounts were less than the collection of cash from customers while a decrease means sales on account were more than the collection of cash.

Cash prepayments

________ increase prepaid expenses.

expenses

Recording ________ decreases prepaid expenses.

on account

Accounts Payable is increased by purchases _______.

suppliers

Accounts Payable is decreased when payments are made to the _______.

Accrued expenses

________ increases Accrued Liabilities.

Payment of expenses

________ decreases Accrued Liabilities.

long lived tangible and intangible assets

The investing activities section of this statement correlates to ________.

Purchases

________ for property or equipment are considered increases.

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Disposals

________ of property or equipment are considered decreases.

net cash from investing activities

Add together the purchases of tangible assets to calculate ________.

Intangible assets

________ are effected by disposals, impairments, and amortization.

owners

Dividends Payable goes to ________.

financial institutions

Notes Payable goes to ________.

financing activity section

Notes Payable, Bonds Payable, Common Stock, Retained Earnings, and Treasury Stock are examples of accounts found in the ________.

reported separately

Cash inflows and outflows are ________.

Net change

________ is combined with the initial cash balance to get the ending cash balance.

balance sheet

The ending cash balance must be the same as the amount found on the ________.

Non-cash investing and financing activities

_________ include material investing and financing transaction that didn’t have an effect on cash flows.

introductory phase

During the __________, a company is in the process of being established. The company has negative net operating cash flows and negative investing cash flows.

growth phase

The ________ indicates the evolution of the company. It has positive operating cash flows.

maturity phase

At the _________, the company stabilizes. It has positive operating cash flows and is no longer expanding.

decline phase

In the _________ (last phase), the company falls out. It has negative operating and financing cash flows, but positive investing cash flows.

Seasonality

_________ means sales are occurring more during specific points of the years. It is one cause of deviation.

corporate life cycle

The _________ (aka growth in sales), is the rapid sales of new companies. This is a cause of deviation and results in negative operating cash flows.

change in revenues and expenses recognition

The __________ says that revenues must be recorded before providing a service and expense reports are delayed. They both increase net income and there is no affect on operating activities.

Changes in working capital management

_________ measures to see if current assets exceed current liabilities. If current assets grow, operating cash flows are reduced.