In: Accounting
Talk briefly about the sections of statement of cash flows.
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Section of Cash Flow Statements: | |||||||
a. Cash flow from Operating Activities | |||||||
b. Cash flow from investing activities | |||||||
c. Cash flow from Financing activities | |||||||
a. Cash flow from Operating Activities | |||||||
Operating activities include cash activities related to net income. | |||||||
This section details the cash that comes from sale of goods service, less cash what goes out | |||||||
to make and sell those goods and services. | |||||||
Example: | |||||||
Cash receipts from customers. | |||||||
Interest income received in cash | |||||||
Dividend income received in cash. | |||||||
Cash received as a result of the settlement of litigation | |||||||
b. Cash flow from investing activities | |||||||
Investing activities include cash activities related to noncurrent assets. the principal amount of loans made to other entities | |||||||
Noncurrent assets include (1) long-term investments; (2) property, plant, and equipment; and (3) | |||||||
This section largely reflects the amount of cash the company has spent on capital expenditures, | |||||||
such as new equipment or anything else that needed to keep the business going. | |||||||
It also includes acquisitions of other businesses and monetary investments such as money market funds. | |||||||
Example: | |||||||
Proceeds from sale of fixed assets (sale of equipment, machinery and plant etc.) | |||||||
Proceeds from sale of land | |||||||
Cash paid to purchase fixed assets (purchase of equipment, machinery and plant etc.) | |||||||
Cash paid to purchase land | |||||||
c. Cash flow from Financing activities | |||||||
Financing activities include cash activities related to noncurrent liabilities and owners’ equity. | |||||||
Noncurrent liabilities and owners’ equity items include (1) the principal amount of long-term debt, (2) stock sales and repurchases, and (3) dividend payments | |||||||
This section describes the goings-on of cash associated with outside financing activities. | |||||||
Typical sources of cash inflow would be cash raised by selling stock and bonds or by bank borrowings. | |||||||
Likewise, paying back a bank loan would show up as a use of cash flow, as would dividend payments and common stock repurchases. | |||||||
Example: | |||||||
Cash received from borrowings (both short and long term). | |||||||
Cash received from issuing of common or preferred stock. | |||||||
Payment of borrowings to others (principle amount only). | |||||||
Payment of cash dividends to the stockholders. |