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Statement of Cash Flows
Understand the purpose of SCF Distinguish between its three sections Understand the difference between the direct and indirect methods for the Operations section
Understand Cash Flow from Operations and how it is derived from Net Income Practice these concepts
15.515 2003 Session 9
1
Statement of Cash Flows
Beginning Balance Assets = Liabilities + S.E.
∆Cash + ∆OA
=
∆Liabilities
+ ∆CC + NI - Div
Assets Ending Balance
= Liabilities
+
S.E. NI
15.515 2003 Session 9
∆Cash +/- “other stuff” =
2
Statement of Cash Flows
Fixed claimants (lenders)
Residual claimants (shareholders)
Managers
Why do we need a separate financial statement?
15.515 2003
Session 9
3
W. T. Grant Bankruptcy
90
40
-10
1966
1967
1968
1969
1970
1971
1972
1973
1974
-60
-110
-160
15.515 2003
Session 9
4
W. T. Grant Bankruptcy
90
40
-10
1966 1967 1968 1969 1970 1971 1972 1973 1974 1975
-60
-110
-160
5
15.515 2003
Session 9
W. T. Grant Bankruptcy
90
Net Income
40 -10 -60 -110 -160
15.515 2003
Session 9
1966 1967 1968 1969 1970 1971 1972 1973 1974 1975
Operating Cash Flow
6
Consolidated Freightways
140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 1994 -20,000 -40,000 -60,000 1995 1996 1997 1998 1999 2000 2001 2002
Net Income
Operating Cash Flow
15.515 2003
Session 9
7
Montgomery Wards Bankruptcy
400 200 0 -200 -400 -600 -800 -1000 -1200 -1400
Operating Cash Flow
1991
1992
1993
1994
1995
1996
Net Income
1997
15.515 2003
Session 9
8
Planet Hollywood Bankruptcy
100000 50000 0 -50000 -100000 -150000 -200000 -250000 -300000
Operating Cash Flow
94
95
96
97
98
99
Net Income
15.515 2003
Session 9
9
Enron
6000 5000 4000 3000 2000 1000 0 1995 -1000 -2000
15.515 2003
Session 9
Operating Cash Flow
Net Income...