Cash Flow Notes

How To Find Cash Flow Notes

This section of the cash flow statement reports the company’s net income and then converts it from the accrual basis to the cash basis by using the changes in the balances of current asset and current liability accounts, such as: An increase in inventory, on the other hand, signals that a company has spent more money to purchase more raw materials. If the inventory was paid with cash, the increase in the value of inventory is deducted from net sales. A decrease in inventory would be added to net sales. If inventory was purchased on credit, an increase in accounts payable would occur on the balance sheet, and the amount of the increase from one year to the other would be added to net sales. When we use the indirect method to prepare a statement of cash flows we begin with the net income figure from the company’s income statement as our starting point. We then make adjustments to that figure to arrive at the cash amount. 3. Why do we add an increase in Accounts Payable? Accounts Payable increase when expenses are not paid immediately. If some expenses were incurred on account, they reduce net income, but do not decrease Cash. The amount of cash we spent for expenses is equal to the expenses incurred minus the increase in Accounts Payable. Cash Flow Notes Receivable Notes Payable (generally due after one year) Bonds Payable Deferred Income Taxes Preferred Stock Paid-in Capital in Excess of Par-Preferred Stock Common Stock Paid-in Capital in Excess of Par-Common Stock Paid-in Capital from Treasury Stock Retained Earnings Treasury Stock When an investor reads a financial statement, a question that they might ask is, “how did the company acquire cash and what did they use the cash for?” In other words, what were the sources and uses of cash? This question is answered by the cash flow statem From this CFS, we can see that the cash flow for FY 2017 was $1,522,000. The bulk of the positive cash flow stems from cash earned from operations, which is a good sign for investors. It means that core operations are generating business and that there is enough money to buy new inventory. The purchasing of new equipment shows that the company has cash to invest in inventory for growth. Finally, the amount of cash available to the company should ease investors’ minds regarding the notes payable, as cash is plentiful to cover that future loan expense. Changes in debt, loans or dividends are accounted for in cash from financing. Changes in cash from financing are “cash in” when capital is raised, and they’re “cash out” when dividends are paid. Thus, if a company issues a bond to the public, the company receives cash financing; however, when interest is paid to bondholders, the company is reducing its cash. Key points: – the cash flow statement explains the change in cash by three types of activities: operating, investing and financing activities – cash flow from operating activities is …

How To Find Cash Flow NotesRead More »