Ch 5 - Interconnectivity of Financial Statements and Statement of Cash Flows

What are the three classifications in statement of CFs?

• Operating CF

• Investing CF

• Financing CF

Operating CF inflows?

Cash received from:

• Goods/services sold

• Supplier refunds

• Investment dividends

• Interest on receivables

Operating CF outflows?

Cash paid for:

• Purchase of inventory

• Salaries & other operating expenses

• Income taxes, duties, fines

• Interest on liabilities

Investing CF Inflows?

Cash received from:

• Sale of PPE

• Sale of LT Debt & Equity Investments

• Collection of loan excluding interest

• Sale of patents/intangible assets

Investing CF Outflows?

Cash paid for:

• Purchase of PPE

• Investments in LT Debt & Equity Investments

• Loans to others

• Purchase of patents/intangible assets

Financing CF Inflows?

• Stock issuance

• Sale of treasury stock

• Bond issuance

• Borrowing from bank

Financing CF Outflows?

• Dividends & other cash distr. to owners

• Re-acquiring previously issued capital stock

• Loan payments on bonds

• Payments on other debt

What is the flow order of the financial statements?

• Balance Sheet

• Statement of Comprehensive Income

• Statement of Stockholder’s Equity

• Statement of Cash Flows

What does statement of comprehensive income contain?

• Net income

• Other Comprehensive Income

Both NI and OCI adjusts RE. T/F?

False, only NI adjusts R/E. OCI adjusts “other OCI” balance.

What are the two categories in the statement of SHE?

• Transactions with owners

• Transactions not with owners

What does transactions with owners contain?

• Stock issuances

• Stock repurchases

• Dividends

What does transactions not with owners contain?

• Net income

• OCI (Other comprehensive income)

Total of SHE accounts = total equity on the balance sheet. T/F?

True

What are the three derivatives of the balance sheet equation to get statement of cash flows?

Start with: Delta( A = L + E)

• Delta(Cash + Noncash Assets = L + E)

• Delta(Cash = L + E - Noncash Assets

• Delta(Cash = NI + L + Non-NI Equity - Noncash Assets)

Net Income affects the ending balance of retained earnings, but other comprehensive income does not. T/F?

True

Which of the following subtotals would not be included on a single-step income statement?

• Gross Profit

• Total expenses and losses

• Operating income

• A&B

• B&C

• A&C