Statement of Cash Flows

Chapter Map: Statements of Cash Flows

Chapter: Introduction

Outsider Perspective: What Do I See?

Insider Perspective:  What’s Behind the Numbers?

Outsider Perspective: How Do I Use the Numbers?

 

 

What Do I See? 

Cash Flow Statements

Learning objectives and key take-aways

 

Express Route Video [16 min]

Exercises

Scenic Route Videos:

1. Direct Cash Flow Statements  [19 min]

Purpose of cash flow statements. Level 1 analysis: major categories. Level 2 analysis: line items - Financing cash flows; Investing cash flows; Operating cash flows. Company disclosures: Qantas.

2. Indirect Cash Flow Statements  [17 min]

Defining characteristics: indirect cash flow statements. Direct versus indirect cash flow statements. Reconciliation: net cash from operations = net income + reconciliation adjustments. Company disclosures: Qantas.

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What’s Behind the Numbers? 1

Cash Flow Statements: Basics

Learning objectives and key take-aways

 

Express Route Video [24 min]

Exercises

Scenic Route Video: 

1. Big Picture [42 min]

Events for EasyLearn Company. BSE matrix: operating, investing, and financing classifications. Entry by entry: Statement of Cash Flow (SCF) effects- Issue stock; Sale on account; Receivable collection; Advertise on account; Payable payment. Grouping related entries: SCF effects- Receivables; Payables. Adjustment signs: Assets, liabilities, and contra assets reconciliation adjustments signs versus the net effect of operating entries on related account.

2. Limitations and Disclosures [32 min]

Limitations: Simplified assumptions for EasyLearn Company; Possible violations of simple assumptions for real companies. Company disclosures: Intel; Oracle. Outsider analysis: how to improve your analysis.

3. Record-Keeping and Reporting Map (R&R Map) [27 min]

Creating statements: EasyLearn’s balance sheets, income statements, statements of changes in owners’ equity, direct cash flow statements, and indirect cash flow statements. Connecting statements. EasyLearn’s R&R Map: Simplified record-keeping and reporting map. Bischoff’s R&R Map: Navigating Accounting’s complete R&R Map.  Bischoff versus EasyLearn R&R Map.  Connecting Owners’ Equity Change (OEC) Map to R&R Map.

4. Reconciliation Adjustment Signs [9 min]

Concepts: Asset reconciliation adjustments have the opposite sign and liability reconciliation adjustments have the same sign as the net effect of operating entries. Explanation: Derive Reconciliation Equation.

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What’s Behind the Numbers? 2

Statement of Cash Flows Entry Map (SCF Entry Map)

Learning objectives and key take-aways


Express Route Video [19 min]

Exercises

Scenic Route Videos:

Scenic videos provide: characteristics of SCF Entry Map route’s entries; Example entry and SCF effects; Scope - relative importance; and R&R Map regions related to route’s entries.

1. Route 1  [6 min]

 Investing or financing cash entries with no gains or losses.

2. Route 2  [6 min]

 Operating entries with the same effect on income and cash from operations.

3. Route 3  [8 min]

 Operating entries with different effects on income and cash from operations.

4. Route 4  [10 min]

 Operating entries that affect working capital, but not income or cash from operations.

5. Route 5  [8 min]

  Investing or financing entries that affect cash and income through gains or losses.

6. Route 6  [6 min]

 Investing, financing, and/or foreign exchange gain/loss entries that don’t affect income or cash.

7. Route 7  [7 min]

   Investing or financing entries that affect income through gains or losses, but not cash.

8. Route 8  [8 min]

  Operating entries that don’t affect cash, net income, or working capital accounts.

9. Redundant SCF Reconciliation Entry Effects  [18 min]

Definition of redundant SCF reconciliation entry effects. Example entry and redundant effects. Historical perspective of why companies include redundant reconciliation effects. Creating cash flow statements in real companies. Affected line items: Multiple and single reconciliation line item effects.

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What’s Behind the Numbers? 3

Creating Cash Flow Statements in Real Companies

Click below for preliminary materials for this module. Eventually, we plan to develop the full content and post it here.

Creating indirect cash flow statements [pdf]

For an overview, watch the “Redundant SCF Reconciliation Entry Effects” video. Click the table of contents’ menu item for “Creating cash flow statements.”


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How Do I Use the Numbers?

Analyzing Cash Flows: Basics

Click below for preliminary materials for this module. Eventually, we plan to develop the full content and post it here. 

 

Exercises

Excerpt: Analyzing cash flows Basics  [pdf]

 

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