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Will
Will the
thecompany
company
have
haveto
toborrow
borrow
money
moneyto
tomake
make
needed
needed
investments?
investments?
Can
Canwe
wemeet
meet
our
ourobligations
obligations
to
tocreditors?
creditors?
Why
Whyis
isthere
thereaa
difference
difference
between
betweennet
net
income
incomeand
andnet
net
cash
cashflow?
flow?
Can
Can we
wepay
pay
dividends?
dividends?
15-2
Cash
The term cash on the statement of cash flows refers
broadly to both currency and cash equivalents.
Currency and
Bank Accounts
Treasury
Bills
Cash
Money Market
Funds
Commercial
Paper
15-3
15-4
15-8
2. Transactions
affecting current
liabilities
3. Changes in
noncurrent
balance sheet
accounts that
directly affect net
income
15-9
2. Acquiring or
selling securities
3. Lending money
to another entity
and subsequently
collecting on the
loan
15-10
3. Payment of
dividends (note
that interest on
debt is classified
as an operating
activity)
15-11
Operating Activities
Investing Activities
Financing Activities
Reconciliation of the
beginning cash balance
with the ending cash
balance
Noncash Investing
and Financing
Activities
15-13
Operating Activities
15-14
Indirect Method
Reports the
cash effects of
each operating
activity
Starts with
accrual net
income and
converts to
cash basis
No matter which format is used, the same amount of net
cash provided by operating activities is generated.
15-15
15-16
15-18
15-19
Add (+) or
Deduct (-) to
Adjust to a
Cash Basis
+
+
+
+
-
+
+
15-21
End of Chapter 15
15-23