Chapter 4, Part 4.2 Learning Notes PDF
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University of Kentucky
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Summary
This document provides learning notes on intermediate accounting, focusing on the statement of cash flows. It explains its purpose, sections (operating, investing, financing), and examples of activities. The document also covers methods of preparing the statement of cash flows and calculations of important financial metrics like current cash debt coverage and free cash flow.
Full Transcript
To provide relevant information about the cash recipients and cash payments of an entity during a period Operating activities Investing activities Financing activites Investing Activites The change in cash for the period, found on comparative balance sheet...
To provide relevant information about the cash recipients and cash payments of an entity during a period Operating activities Investing activities Financing activites Investing Activites The change in cash for the period, found on comparative balance sheet (The di erence between beginning and end in cash) Cash Flows from nancing activities Indirect Method Direct Method Direct Method (Does not require it) Material nancing and investing activities that do not a ect cash Issuance of common stock to PPE Issuance of debt to purchase PPE Conversation of bonds into common stock Ex. Purchase land, gave down payment and note, the portion that a ected the note Bottom of statement cash ows or in the notes of the nancial statement Indicates a company’s ability to repay its liabilities from net cash provided by operating activites, without having to liquidate the assets employed in its operations. Net cash provided by operating activites / average current liabilities Whether the company can pay o its current Liabilites from its operations in a given year Net cash provided by operating activites / average total liabilities Indicates that the company can meet all of its current obligations from internally generated cash ow Net cash provided by operating activites - capital expenditures - cash dividends Indicates avaliable funds after capital purchases and payments of cash dividends Current Cash Debt Coverage (ON EXAM) Net cash provided by operating activities / Average current liabilities Cash debt Coverage Net cash provided by operating activities / average total Liabilites Free Cash Flow Net cash provided by operating - capital expenditures - cash dividends Indicates avaliable funds after capital purchases and payments of cash dividends
