Professional Documents
Culture Documents
Chapter 5 - Statement of Cash Flows
Chapter 5 - Statement of Cash Flows
CHAPTER
1. Identify the purposes of the statement of cash flows 2. Classify activities affecting cash as operating, investing, or financing activities 3. Compute and interpret cash flows from financing activities 4. Compute and interpret cash flows from investing activities 5. Use the direct method to calculate cash flows from operations
2 of 33
3 of 33
4 of 33
5 of 33
6 of 33
7 of 33
8 of 33
9 of 33
10 of 33
11 of 33
12 of 33
The indirect method of computing cash flows from operating activities reconciles net income to the net cash provided by operating activities Depreciation is added back to net income because it is a noncash item. Add decreases in noncash current assets. Add increases in current liabilities. Deduct increases in noncash current assets. Deduct decreases in current liabilities.
End
13 of 33
14 of 33
15 of 33
16 of 33
Net Income Add back Depreciation Expense Increase in Receivables Increase in Inventory
2010 Pearson Education Inc. Publishing as Prentice Hall
Net Income Add back Depreciation Expense Increase in Receivables Increase in Inventory Increase in Accounts Payable
2010 Pearson Education Inc. Publishing as Prentice Hall
19 of 33
20 of 33
21 of 33