Chapter 3.

5 cash flows

Derivation of the cash flow of Diaz company

from balance sheet and income statement in Mio $

Assets 2008 2007

Cash 288.5 16.6
Accounts receivable 306.2 268.8
Inventories 423.8 372.7
Other current assets 21.3 29.9

plant and equipment 399.4 394.2

Goodwill and other assets 450 411.6

Total assets 1889.2 1493.8

simple balance of differences

change in assets
Cash 271.9
Accounts receivable 37.4
Inventories 51.1
Other current assets -8.6
0
Net plant and equipment 5.2
Goodwill and other assets 38.4

grouped balance of differences

change in assets
increase in assets (use of cash)
Cash 271.9
Accounts receivable 37.4
Inventories 51.1
Net plant and equipment 5.2
Goodwill and other assets 38.4

decrease in assets (source of cash)

Other current assets -8.6

balance of mouvements

use of cash

increase in assets (use of cash)

Cash 271.9
Accounts receivable 37.4
Inventories 51.1
Net plant and equipment 5.2
Goodwill and other assets 38.4

decrease in liabilities and equity (use of cash)

Treasury stock 23.3

Statement of cash-flows

in Mio $

+ net income 118.5 (from the income statem

(from the income statement)
additions (sources of cash)
+ depreciation and amortization 83.1 (from the income statem
+ increase in accounts payable 24.3 (from the balance of mo
+ decrease in other current assets 8.6 (from the balance of mo
+ increase in accrued income taxes 1.2 (from the balance of mo
substractions (uses of cash)
- increase in accounts receivable -37.4 (from the balance of mo
- increase in inventories -51.1 (from the balance of mo
= cash flow from operating activities 147.2

long term investing activities (use of cash)

- plant and equipment -88.3 (results from substractio

- increase in goodwill and other assets -38.4 (from the balance of mo

net cash used in investing activities -126.7

financing activities
+ increase in long term deb(source of cash) 268.4 (from the balance of mo
- purchase of treasury stock(use of cash) -23.3 (from the balance of mo
+ increase in notes payable (source of cash) 6.3 (from the balance of mo

net cash provided by financing activities 251.4

cash reconciliation
net increase in cash in the year 2008 271.9 (from the balance of mo
cash at the beginning of the year 2008 16.6
cash at the end of the year 2008 288.5
liabilities and equity 2008 2007
accounts payable 349.3 325
Notes payable 10.5 4.2
accrued taxes 18 16.8

long trerm debt 574 305.6

preferred stock 0 0
Common stock (54.566.064 shares 50 50
outstanding)
Additional paid in capital 842.9 842.9
retained earnings 67.8 -50.7
Treasury stock (571.320 shares) -23.3 0

Total liabilities and equity 1889.2 1493.8

change in liabilities and equity

accounts payable 24.3
Notes payable 6.3
accrued taxes 1.2

long trerm debt 268.4

preferred stock 0
Common stock (54.566.064 shares 0
outstanding)
Additional paid in capital
retained earnings 118.5
Treasury stock (571.320 shares) -23.3

change in liabilities and equity

 increase in liabilities and equity ( source of cash)
accounts payable 24.3
Notes payable 6.3
accrued taxes 1.2
long trerm debt 268.4
retained earnings 118.5

decrease in liabilities and equity (use of cash)

Treasury stock -23.3

source of cash

increase in liabilities and equity ( source of cash)

accounts payable 24.3
Notes payable 6.3
accrued taxes 1.2
long trerm debt 268.4
retained earnings 118.5 (Das ist der net income, der
voll in die retained earnings
decrease in assets (source of cash) eingestellt wird )

Other current assets 8.6

= berücksichtigt
im cash flow statement

m the income statement)

m the income statement)

m the balance of movements)
m the balance of movements)
m the balance of movements)
m the balance of movements)
m the balance of movements)

ults from substraction of the gross values of plant and equipment in 2008 and 2007 in the balance sheet)
m the balance of movements)

m the balance of movements)

m the balance of movements)
m the balance of movements)
Hinweis:
Bei der Diaz Company geht der
net income vollständig in die retained earnings im Jahr 2008.
Es wird also nichts an die Aktionäre ausgeschüttet.

m the balance of movements)

s ist der net income, der
in die retained earnings
estellt wird )
he balance sheet)

earnings im Jahr 2008.

sgeschüttet.
Chapter 3.5 cash flows

Exercise:

Analysts following the Tomkovick Golf Company were given the following
information for the year ended June 30 in 2015:

Assets
Cash and marketable securities
Accounts receivable
Inventories
Other current assets
Total current assets

plant and equipment

less: accumulated depreciation
net plant and equipment
Goodwill and other assets

Total assets

In addition, it was reported that the company had a net income of $ 3.155.848
and that depreciation expenses were equal to $212.366

Please construct a cash flow statement for this firm

(Start with the balance of differences, then derive
the grouped balance of differences, then
go on with the balance of movements to finally
establish the statement of cash flow)

Please note that the change in net plant has to be modified with depreciation.
And note also that the firm wants to increase it´s retained earnings up to 587.546.
So the net income of the year 2015 has to fill up the retained earnings up to that level; the rest can
go to the shareholders as cash dividends.
simple balance of differences

change in assets 2015-2014

grouped balance of differences

change in assets
balance of mouvements

use of cash

statement of cash flows

Exercise 2:

Vanderheiden Hog Products Corp. provided the following financial information for the quarte

Depreciation and amortization: $ 63,114

Increase in receivables: $62.154
Increase in accounts payable: $37.665
Decrease in marketable securities: $27.450
Net income: $189.425
Increase in inventory: $57.338

What is the cash flow from operating activities generated during this quarter by the firm?

Hint: Using the template below, complete the Statement of Cash Flows using the figures give
missing figures.

Vanderheiden Hog Products Corp.

Statement of Cash Flows for the period ending June 30, 2009
OPERATING ACTIVITIES
Net income
Additions (Sources of Cash)

Subtractions (Uses of Cash)

Net cash provided by operating activities

 2015 2014 liabilities and equity 2015
33,411 16,566 accounts payable and accruals 378,236
260,205 318,768 Notes payable 14,487
423,819 352,740 accrued taxes 21,125
41,251 29912 Total current liabilities 413,848
758,686 717,986
long trerm debt 679,981
1,931,719 1,609,898 Total liabilities 1,093,829
- 419,044 -206678
1,512,675 1,403,220 preferred stock
382,145.00 412,565.00 Common stock (10.000 shares) 10,000
outstanding)
Additional paid in capital 975,465
2,653,506 2,533,771 retained earnings 587,546
Treasury stock - 13,334
Total common equity 1,559,677

Total liabilities and equity 2,653,506

evel; the rest can

change in liabilities and equity 2015-2014

change in liabilities and equity

source of cash
nformation for the quarter ending June 30, 2009:

s quarter by the firm?

ows using the figures given above and enter formulas in the appropriate cells to compute the
 2014
332,004
7,862
16,815
356,681

793,515
1,150,196

10,000

975,465
398,110
-
1,383,575

2,533,771