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Depreciation expense
Accretion expense on asset retirement obligation
Amortization of intangibles
Impairment loss on goodwill and intangibles
Earnings of affiliated companies accounted for using the equity method
Impairment losses on other noncurrent assets
Compensation expense related to stock options
Net income also includes gains and losses from investing and financing activities
Gain ≠ cash received (unless carrying value was zero)
Even when there is a loss, cash might have been received
Net income must be adjusted for these items to get the cash provided by operations
For other items, there are revenues/expenses as well as cash flows but the amounts are
different:
Bond interest expense ≠ bond interest paid (if bonds were sold at premium or
discount)
Sales were not all collected in cash (bad debts, other changes in Accounts Receivable)
Purchases were not necessarily paid for during period (change in Accounts Payable)
Income tax expense ≠ income taxes paid due to deferred tax assets/liabilities as well
as income taxes refunds receivable or unpaid taxes owed
Company, Inc.
Statement of Cash Flows
For the year ended December 31, 199X
Outflows:
To suppliers for inventory and other materials
To employees for services
To other entities for services (insurance, etc.)
To government for taxes
To lenders for interest
To purchase trading securities
*except investments classified as trading securities which are included in operating activities
Financing Activities
(Usually associated with long-term liability and equity items)
Inflows:
From issuance of debt (bonds and notes)
From issuance of equity securities
Common stock
Preferred stock
Re-issuance of treasury stock
Outflows:
To stockholders as dividends
To repay or retire long-term debt, including capital
leases for lessee (interest on leases is classified as
operating)
To reacquire capital stock (treasury stock)