University:
California State University, Northridge
Course:
FIN 491A-C | Seminar in Financial Analysis
Academic year:

2004
Views:

218

Pages:

15
Author:

Lacey Moss

STATEMENT OF CASH FLOWS EXAMPLE (Figure 11-4, Page 256, Riggs) Cash flow from operating activities: Net income Noncash items included in net income Depreciation and amortization Deferred income taxes Inventory reserves Translation (gain) loss Net (increase) decrease in: Accounts and contracts receivable Inventories Prepaid and other Net increase (decrease) in: Accounts payable and accrued expenses Income taxes payable Other, net $ 8,215 14,987 (2,307) 3,473 (2,921) (7,420) (3,912) 273 (11,814) 468 822 Net cash provided (used) by operations (136) securities, net Cash flows from investing activities: Purchase of short-term investments and marketable Maturities of short-term investments Acquisition of property, plant and equipment Acquisition of subsidiary, net of cash acquired Capitalized software Net cash used in investing Cash flows from financing activities: (40,310) 45,176 (8,329) (1,668) (1,725) (6,856) Additions to long-term debt, net 19,780 Dividends (7,886) Stock issued under employee stock purchase and stock option plans 1,930 Payment for treasury stock (5,160) Net cash provided by investing 8,664 Net increase in cash and cash equivalents 1,672 Cash and cash equivalents at beginning of year 74,368 Cash and cash equivalents at end of year $76,040 page 259, #11.5: Name two inflows (sources) of cash that do not appear as REVENUE on the INCOME STATEMENT. Newly-invested capital will provide cash, but will not appear as Revenues on the Income Statement Funds resulting from taking out a loan or a note will provide cash, but will not appear as Revenues on the Income Statement Sale of assets will generate cash, but will not appear as Revenues on the Income Statement page 259, #11.6: Explain in simple terms why an INCREASE in Accounts Receivable balances between two dates represents a USE of cash during the interval, and why a DECREASE in inventory balances between two dates represents a SOURCE of cash during the interval. Accounts Receivables are Sales for which no Cash has yet been received, even though the organization is expending Cash in order to provide the goods and/or services. To the extent that Accounts Receivables increases, additional expenditures of Cash are made in order to provide the goods and/or services, with a concomitant reduction of the Cash available to the organization. The organization's operating source of funds is being used to "finance" its Accounts Receivables. The acquisition of Inventory is accompanied by an expenditure of Cash. To the extent that Inventory declines between two time periods, it is being converted to goods for sale and is not being completely replaced. To the extent that Cash resulting from Sales is not being reinvested in Inventory, there is a concomitant increase in the Cash available for other purposes. fixed assets in 1995 valued at $54,000, realized a $4,000 gain on the sale of fixed assets (which had an original cost of $16,000 and a net book value at the time of sale of $7,000), and showed an increase of $27,000 in net fixed assets on its year-end balance sheet. Show the detail of sources and uses of cash for the year as related to fixed assets. Journal Entries Required: "acquired new fixed assets... valued at $54,000" Dr: Fixed Asset $ 54,000 Cr: Cash $ 54,000 "realized a $4,000 gain on the sale of fixed assets (... original cost of $16,000,... book value... of $7,000)" $16,000 original purchase, less $7,000 book value, equals $9,000 depreciation expense taken Dr: Cash $ 11,000 Dr: Allowance for Depreciation $ 9,000 Cr: Gain(Loss) - Disposition of Fixed Asset $ 4,000 Cr: Fixed Asset $ 16,000

Cash Flow Statement

of 15

Description

Free up your schedule!

Take 5 seconds to unlock