Statement of Cash Flows

Statement of Cash Flows

Cash generated by a firm differs from what's reported on the Income Statement due to factors like:

  • Depreciation
  • Increased/Retiring Debt
  • Investments

The Statement of Cash Flows has three sections reporting cash flows from different activities:

  • Cash flows from operating activities
  • Cash flows from investing activities
  • Cash flows from financing activities

Cash Flows From Operations

Calculated as:

  • Net Income + Depreciation
  • Changes in Accounts Receivable (A/R) and Accounts Payable (A/P)
  • Changes in Inventory
  • Changes in Pre-paid and Accrued Balances

Cash Flows From Investment Activities

Involve transactions related to buying and selling:

  • Property, Plant, and Equipment
  • Investments (current and non-current)
  • Notes Receivable (current and non-current)

Cash Flows from Financing Activities

Involve funds secured by borrowing or issuing stock.

  • Cash inflows:
    • Cash received from issuance of common stock.
    • Cash received from issuance of bonds.
    • Cash received from issuance of N/P (short-term or long term).
  • Cash Outflows:
    • Paying off bonds.
    • Repurchasing stock.
    • Payments of N/P.
    • Payments of dividends.

Cash Flows - Net Amounts

Cash Flows from Operating Activities:

  • Net income: $54.0
  • Additions (adjustments) to net income:
    • Depreciation: $50.0
    • Increase in accounts payable: $15.0
    • Increase in accruals: $5.0
  • Subtractions (adjustments) from net income:
    • Increase in accounts receivable: ($20.0)
    • Increase in inventory: ($70.0)
  • Net cash flow from operations: $34.0

Cash Flows from Long-Term Investing Activities:

  • Acquisition of fixed assets: ($80.0)

Cash Flows from Financing Activities:

  • Increase in notes payable: $5.0
  • Increase in bonds: $45.0
  • Dividend payment: ($29.0)
  • Net cash flow from financing: $21.0

Overall Cash Flow:

  • Net change in cash: ($25.0)
  • Cash at the beginning of the year: $40.0
  • Cash at the end of the year: $15.0

Statement of Retained Earnings - Intel (For the Period Ending Dec. 31, 2020)

  • Balance of retained earnings, December 31, 2019: $260.0
  • Add: 2020 net income: $54.0
  • Less: 2020 dividends paid to stockholders: ($29.0)
  • Balance of retained earnings, December 31, 2020: $285.0