Summary

Statement of Cash Flows

Layout of Statement of Cash Flows:

Cash Flows from Operating Activities

• Inflows (+):
  • interest and dividends received
  • sales to customers
• Outflows (-):
  • suppliers of merchandise and services
  • employees
  • lenders for interest
  • governments for taxes

Cash Flows from Investing Activities

An investment is any use of cash today with the expectation of receiving a return (profit) in the future. By lending money, you are “buying” a Note Receivable—a long-term asset.

• Inflows (+):
  • Sale of investments and plant assets
  • Collection of principal on loans
• Outflows (-):
  • Purchase investments and plant assets
  • Purchase debt or equity investments
  • Make loans

Cash Flows from Financing Activities

When you repay the principal of a loan you took out, it is considered a financing activity.

• Inflows (+):
  • Short-term and long-term borrowing
  • Owners, i.e. from issuing stock
• Outflows (-):
  • payments on borrowed
  • owners (i.e. dividends, stock repurchase)
  • purchase treasury stock

Cash Budget