Weis Markets Case Study

Concepts

a. The statement of cash flows provides the users with a summary of the handling of and accounting for cash only. It does not include any other assets or forms of revenue. The difference between a statement of cash flows and income statement is that an income statement is accounting for revenue and expenses. The income statement does not differentiate between the forms of revenue while the cash flow statement focuses solely on cash.

b. The two different types of cash flow statements are the direct and indirect methods. Weis Markets use the indirect method for its cash flow statements. We know this because the statement starts with net income. The direct method starts with cash received through the different activities. The indirect method is the preferred method for businesses for several reasons; 1) this is GAAP’s preferred method and 2) when starting with net income, it is easier to reconcile for accounts that have a non-cash effect on net income.

c. The three sections of the cash flow statement are the operating, financing, and investing sections.

d. The operating section relates to the balance sheet by helping to reconcile the cash and cash equivalents. This affects the assets section of the balance sheet as well as the liability side for the cash effects of producing these revenues. The investing section relates to the balance sheet as it records how cash was used to purchase assets that improve the company's financial standing. The financing section of the income statement feeds into the balance sheet by showing how capital was raised and into what areas this capital fed.

e. Cash equivalents are any security or other form of capital that reaches maturity within , usually, 90 days. These can consist of commercial paper, bonds, or treasury bills.

f. The income statement starts with net income which is accrued, but to determine the correct amount of cash that was generated by each category; you must start with the net income...