Nguyên lý kế toán - Chapter 12: Reporting and interpreting the statement of cash flows

Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/IrwinChapter 12Reporting and Interpretingthe Statement of Cash FlowsPowerPoint Authors: Susan Coomer Galbreath, Ph.D., CPA Charles W. Caldwell, D.B.A., CMA Jon A. Booker, Ph.D., CPA, CIA Fred Phillips, Ph.D., CAOperationsCash received and paidfor day-to-day activitieswith customers, suppliers,and employees.InvestingCash paid and receivedfrom buying and sellinglong-term assets. FinancingCash received and paidfor exchanges withlenders and stockholders.Business Activities and Cash FlowsThe Statement of Cash Flows focuses attention on: 12-3CashChecking and Savings AccountsCash EquivalentsHighly liquid short-term investmentswithin three months of maturity.Business Activities and Cash FlowsCurrency12-4Cash inflows and outflows that directly relate to revenues and expenses reported on the income statement.Operating Activities12-5Investing ActivitiesUnder Armour’s 2008 Investing Activities12-6Financing ActivitiesUnder Armour’s 2008 Financing Activities12-7Relationships Between Classified Balance Sheet and Statement of Cash Flow (SCF) Categories12-8 Information needed to prepare a statement of cash flows:Comparative Balance Sheets.Income Statement.Additional details concerningselected accounts.Relationship to Other Financial Statements12-9Relationship to Other Financial StatementsRecall that the basic Balance Sheet equation is:We can recast the equation as follows:The following equation is true:From this basic Balance Sheet equation, wedevelop our model to solve for the change in cash:12-10Cash Flows from Operating Activities - Indirect MethodNet IncomeCash Flows from Operating Activities - Indirect MethodChanges in current assets and current liabilities.+ Losses and - Gains+ Noncash expenses such as depreciation and amortization.The indirect method adjusts net incomeby analyzing noncash items. 12-11Use this table when adjusting Net Income to Operating Cash Flows using the indirect method.Relationships to the Balance Sheet and the Income StatementChange in accountbalances during the year12-12Direct and Indirect Reportingof Operating Cash FlowsWhen using the indirect method, start with accrual basis net income and adjust it for:items that are included in net income but do not involve cash, and items that are not included in net income but do involve cash.12-13Operating cash flows must be positive over the long-run for a company to be successful.An upward trend in operating cash flows over time indicates growth and efficient operations.Evaluating Cash Flows12-14Quality ofIncomeRatioNet Cash Flow from Operating ActivitiesNet Income=A measure for determining what portion ofa company’s income was generated in cash.A ratio near 1.0 indicates a high likelihood that revenues are realized in cash and that expensesare associated with cash outflows.Evaluating Cash FlowsQuality ofIncomeRatio7938== 2.08 for Under Armour in 200812-15CapitalAcquisitionsRatioNet Cash Flow from Operating ActivitiesCash Paid for Property, Plant, and Equipment=A measure for determining whether a company is generatingenough cash internally to purchase long-term assets.A ratio greater than 1.0 indicates that outsidefinancing was not needed to purchase long-term assets.Evaluating Cash FlowsCapitalAcquisitionsRatio7936== 2.19 for Under Armour in 200812-16Reporting Operating Cash Flows with the Direct MethodProvides more detailed informationIdentifies cash inflows and outflows relationshipsPrepared by adjusting accrual basis to cash basisInvesting and financing sections for the two methods are identical 12-17Depreciation ExpenseLoss on Saleof PPEA loss on the sale of PPE is added back to net income just as depreciation expense is added back. Adding these noncash items restores net income to what it would have been had depreciation and the loss not been subtracted at all.Just the opposite is true for a gain on the sale of PPE. Subtracting the gain reverses the effect of the gain having been added to net income. Gain on Saleof PPEReporting Sales of Property, Plant, and Equipment (PPE) (Indirect)12-18End of Chapter 12