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The Statement of Cash Flows Revisited
Chapter 21
PowerPoint Authors:
Susan Coomer Galbreath, Ph.D., CPA Charles W. Caldwell, D.B.A., CMA Jon A. Booker, Ph.D., CPA, CIA Cynthia J. Rooney, Ph.D., CPA
Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.
21-2
Cash Inflows and Outflows
Cash Inflows
Operating Activities
Cash received from revenues
Investing Activities Sale of operational assets
Sale of investments
Collections of loans
Financing Activities Issuance of stock
Issuance of bonds and notes
Business
Cash paid for expenses
Purchase of operational assets
Purchase of investments Loans to others
Payment of dividends Repurchase of stock
Repayment of debt
Cash Outflows
21-3
Role of the Statement of Cash Flows
Lists all cash inflows and all cash outflows by category: operating, investing, and financing
Explains the change in cash during the period
Cash is King!
Required by GAAP
Especially during an economic downturn.
21-4
Cash and Cash Equivalents
Resources immediately available to pay obligations.
Short-term, highly liquid investments.
Readily converted into cash, with little or no risk of loss.
Examples: money market funds Treasury bills
Maturity date must not be longer than 3 months from date of purchase.
Primary Elements of the Statement of Cash 21-5 Flows
Operating Activities
Reconciliation of the Net
Investing Activities
Increase or Decrease in Cash with the Change in
the Balance of the Cash Financing Activities Account
Noncash Investing and Financing Activities
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