CASH FLOW FROM OPERATING ACTIVITIESNet Income + Depreciation, Amortization or Depletion + Non-operating Losses - Non-operating Gains + any increases in Current Liabilities + any decreases in Current Assets - any decreases in Current Liabilities - any increases in Current Assets = Cash Flow from Operating Activities 

CASH FLOW FROM INVESTING ACTIVITIES: + sell Long-term assets for cash - buy (construct) Long-term assets for cash = Cash Flow from Investing Activities 

CASH FLOW FROM FINANCING ACTIVITIES: + Stock issued for cash + Cash borrowed with loans and bonds - Treasury stock repurchased for cash - Cash used to repay loans and bonds - Cash dividends paid =Cash Flow from Financing Activities 

Total Cash Flow (Operating, Investing, Financing) + Beginning Cash = Ending Cash

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imple example of cash flow statementDuring the year Shiner Corporation paid dividends of $18,000. Shiner also issued $150,000 in bonds and purchased land, a building, and some equipment for cash.Comparative Balance SheetShiner CorporationAssets Dec 31, 1996 Dec 31, 1995Cash $37,000 $49,000Accounts Receivable $26,000 $36,000Prepaid Expenses $6,000 $0

Land $70,000 $0Building $200,000 $0Accumulated Depreciation $11,000 $189,000 $0Equipment $68,000 $0Accumulated Depreciation $10,000 $58,000 $0Total Assets $386,000 $85,000Liabilities and Stockholder Equity Accounts Payable $40,000 $5,000Bonds Payable $150,000 $0Common Stock $60,000 $0Retained Earnings $136,000 $20,000Total Liabilities and Stockholder Equity $386,000$85,000Income StatementShiner CorporationRevenue $492,000Operating Expenses $269,000 Depreciation $21,000 $290,000Income before Income Taxes $202,000Income Tax Expense $68,000Net Income $134,000

Step 1: Change in Cash: Dec 31, 96 Balance minus Dec 31, 95 balance ($37,000-$49,000)=($12,000)Step 2: Net Cash flow from Operating ActivitiesDirect Method:Cash collected from Revenues $502,000Cash payments for Expenses $240,000Income before Income Taxes $262,000Cash payment of taxes $68,000Net cash flow from Operating Activities $194,000Comments: The $502,000 was derived by adding the change in Accts Receivable to Revenues for the period. The cash payments for expenses was derived by adding the increase in prepaid assets and subtracting the change in Accts Payable.Indirect Method:Net Income $134,000Adjustments to reconcile net income to net cashAccts Receivable decrease $10,000

Prepaid Expense ($6,000)Accts Payable Increase $35,000Depreciation $21,000$60,000Net cash flow from Operating Activities $194,000Step 3:Investing Activities:Land Purchase $70,000Building Purchase $200,000Equipment Purchase $68,000Financing Activities :Dividend payment to shareholders $18,000Issuance of Bonds Payable $150,000Statement of Cash FlowsCash Flow from Operating ActivitiesNet Income $134,000Adjustments to reconcile net income to net cashAccts Receivable decrease $10,000Prepaid Expense increase ($6,000)Accts Payable Increase $35,000Depreciation $21,000$60,000Net cash provided from Operating Activities $194,000Investing ActivitiesLand Purchase ($70,000)Building Purchase ($200,000)Equipment Purchase ($68,000) ($338,000)Financing ActivitiesDividend payment to shareholders ($18,000)Issuance of Bonds Payable $150,000 $132,000Net Decrease in Cash ($12,000)Cash Jan 1, 1996 $49,000Cash Dec 31, 1996 $37,000

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