Finance School of Management The Cash-Flow Statement Shows the cash that flowed into and from a firm during a time period Focuses attention on a firm's cash situation A firm may be profitable and short of cash Unlike the balance sheet and income statement cash flow statements are independent of accounting methods Net income is based on accrual accounting methods and affected by many judgments about issues such as how to value the inventory, depreciate the tangible assets, and amortize the intangible assets uesTc
11 Finance School of Management The Cash-Flow Statement ❖ Shows the cash that flowed into and from a firm during a time period. – Focuses attention on a firm’s cash situation. ✓ A firm may be profitable and short of cash. – Unlike the balance sheet and income statement, cash flow statements are independent of accounting methods. ✓ Net income is based on accrual accounting methods, and affected by many judgments about issues such as how to value the inventory, depreciate the tangible assets, and amortize the intangible assets
Finance School of Management GPC Cash Flow Statement for he Year ending Dec 31, 2XX1 Net income 23.4 Depreciation 30.0 ncrease in acc rec (10.0) ncrease in invent (30.0 Increase in acc pay 12.0 Total cash from operations 254 Invest in new ppe (90.0) *Cash flow invest activities (900) Div paid (100 +Inc short-term debt 94.6 Cash flow from financing 84.6 Chng cash & mkt securities 20.0 uesTc 1
12 Finance School of Management GPC Cash Flow Statement, for the Year ending Dec 31, 2xx1 Net income 23.4 + Depreciation 30.0 - Increase in acc rec (10.0) - Increase in invent (30.0) + Increase in acc pay 12.0 *Total cash from operations 25.4 - Invest in new ppe (90.0) *Cash flow invest' activities (90.0) -Div paid (10.0) + Inc short-term debt 94.6 *Cash flow from financing 84.6 **Chng cash & mkt securities 20.0
Finance School of Management GPC Income statement for Year ending 2xx 1 Cost of goods sold (110.0) GPC Balance Sheet at Dec 31. 2xx1 *Gross margin 90.0 Chang Gen sell, admin exp (30.0) Operating income Cash& mkt'ble secs Receivables 600 100 Interest expense (21.0) Inventories 15001800 300 Taxable income 39.0 Current assets 0003600 60.0 tax (15.6) Pp&e 400.0 900 Net income 23.4 Acc depreciation (1000(1300) *Net pp&e 300.0 360.0 Allocation to divs 10.0) chg retained earn 13.4 **Total Assets 6000720.0120 GPC Cash Flow Statement, for Liabilities Equity Accounts payable the Year ending Dec 31, 2xx1 Short-term debt 001846 94.6 *Current liabilities 150.0 256.6 106.6 Net income Depreciation Long-term debt 15001500 Increase in acre **Total liabilities 30004066 106.6 Increase in acc pay Paid-in capital 200.0 00.0 Total cash from operations 25.4 Retained earnings 10001134 shareholder rs equ 300.0 313.4 Invest-in new-ppe Cash flow investactivities (900 Liab Shareholder 6000720.0 120.0 Div paid (10.0 + Inc short-term debt 946 Cash flow from financing uesTc Chng cash mkt se curt
13 Finance School of Management GPC Balance Sheet at Dec 31, 2xx1 2xx0 2xx1 Change Assets Cash & mkt'ble secs 100.0 120.0 20.0 Receivables 50.0 60.0 10.0 Inventories 150.0 180.0 30.0 *Current assets 300.0 360.0 60.0 Pp&e 400.0 490.0 90.0 Acc depreciation (100.0) (130.0) (30.0) *Net pp&e 300.0 360.0 60.0 **Total Assets 600.0 720.0 120.0 Liabilities & Equity Accounts payable 60.0 72.0 12.0 Short-term debt 90.0 184.6 94.6 *Current liabilities 150.0 256.6 106.6 Long-term debt 150.0 150.0 - **Total liabilities 300.0 406.6 106.6 Paid-in capital 200.0 200.0 - Retained earnings 100.0 113.4 13.4 *Shareholders equ 300.0 313.4 13.4 Liab + Shareholder 600.0 720.0 120.0 GPC Income Statement for Year Ending 2xx1 Sales revenues 200.0 Cost of goods sold (110.0) *Gross margin 90.0 Gen sell, & admin exp (30.0) *Operating income 60.0 Interest expense (21.0) *Taxable income 39.0 Income tax (15.6) *Net income 23.4 Allocation to divs (10.0) *Chg retained earn 13.4 GPC Cash Flow Statement, for the Year ending Dec 31, 2xx1 Net income 23.4 + Depreciation 30.0 - Increase in acc rec (10.0) - Increase in invent (30.0) + Increase in acc pay 12.0 *Total cash from operations 25.4 - Invest in new ppe (90.0) *Cash flow invest' activities (90.0) -Div paid (10.0) + Inc short -term debt 94.6 *Cash flow from financing 84.6 **Chng cash & mkt securities 20.0
Finance School of Management Notes on Financial statements More information relevant to understanding the true financial condition of the company in the notes to the financial statements An explanation of accounting methods used Greater details regarding certain assets or liabilities Information regarding the equity structure of the firm Documentation of changes in operations Off-balance-sheet items uesTc 14
14 Finance School of Management Notes on Financial Statements ❖ More information relevant to understanding the true financial condition of the company in the notes to the financial statements. –An explanation of accounting methods used –Greater details regarding certain assets or liabilities –Information regarding the equity structure of the firm –Documentation of changes in operations –Off-balance-sheet items