cash flow good(three)

7-1

Cash-Flow AnalysisCash-Flow Analysis Cash-Flow AnalysisCash-Flow Analysis

Prof. PUTTU GURU PRASADFACULTY

INC [email protected]

AS-3AS-3 Cash Flow Statements

7-2

IndexIndex Introduction Applicability Definitions Cash and Cash equivalents Features of Cash Flow Statement

Operating Activities Investing Activities Financing Activities

• Interest• Dividend• Foreign Currency transactions• Extraordinary items• Treatment of Tax• Investments in subsidiaries, associates and joint ventures• Acquisitions and disposals of subsidiaries and other business units• Non-cash transactions• Disclosures of cash and cash equivalents

7-3

WHYWHY PREPARE A CASH FLOW PREPARE A CASH FLOW STATEMENT?STATEMENT?

Balance sheets, an income statement and statement of changes in equity are based on accrual accounting and provide only piecemeal information about flows of funds and cash

Cash flow statement identifies cash inflows and outflows from activities over the period

Statement helps answer questions such as: Why is the company in a liquidity crisis when it has been profitable over the past few years?

7-4

WHY AWHY A CASH FLOW CASH FLOW STATEMENT?STATEMENT? Profit and liquidity for a normal firm preparing its

accounts on the accrual basis does not mean the same thing. A firm may be highly profitable but may find itself with hardly any cash or working capital to continue the operating cycles, a heavy loss making firm may find itself flush with funds. Only in case of a firm that prepares its accounts on the cash basis will find its profits and cash flow to be the same.

Hence is the reason for preparing the cash flow statements to understand the actual requirements of cash and cash equivalents

7-5

CFSCFS help investors help investors Asses the company’s ability to generate cash

flows from operations in the future

Assess the company’s ability to meet its obligations, any requirement of external financing and to pay the shareholder’s dividends.

Analyze the reasons for the difference between the net profit and cash flows

Analyze the effects on the organization's financial position of its cash and non-cash investing and financing activities

7-6

IntroductionIntroduction Most developed counties, as early as in 1988, stated their

preference to cash flow reporting rather than funds flow reporting

The difference basically lies in the fact that while funds flow refers to the entire working capital, cash flow only takes cash and cash equivalents into consideration.

Thus, whereas funds flow is based on accrual basis and funds from operation is nothing but net profit plus all non –cash expenses and amortizations, cash flow is based purely based upon the movements of cash and its equivalents.

This makes cash flow reporting much more attractive

7-7

IntroductionIntroduction

Cash flow statement is additional information to user of financial statement

This statement exhibits the flow of incoming and outgoing cash

This statement assesses the ability of the enterprise to generate cash and cash equivalents

It also assesses the needs of the enterprise to utilize the cash and cash equivalents generated

It also assesses the liquidity and solvency of the enterprise.

7-8

ApplicabilityApplicability

This standard applies to the enterprises:

Having turnover more than Rs. 50 Crores in a financial year;

Listed companies;

Cash flow statement of listed companies shall be presented only under the indirect method as prescribed in AS 3

7-9

DefinitionsDefinitions Cash comprises cash on hand and demand

deposits with banks. Cash equivalents are short term, highly liquid

investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.

Cash flows are inflows and outflows of cash and cash equivalents.

7-10

DefinitionsDefinitions Operating activities are the principal revenue-

producing activities of the enterprise and other activities that are not investing or financing activities.

Investing activities are the acquisition and disposal of long-term assets and other investments not included in cash equivalents.

Financing activities are activities that result in changes in the size and composition of the owners’ capital (including preference share capital in the case of a company) and borrowings of the enterprise.

7-11

CashCash and Cash Equivalents and Cash Equivalents Cash Equivalents

Held for meeting short term commitments It is readily convertible into known amounts of

cash It has a very insignificant risk Short maturity (say 3 months maximum)

Cash flows exclude Movements between cash and cash

equivalents Cash management includes the investment of

excess cash in cash equivalents

7-12

FeaturesFeatures of Cash Flow of Cash Flow StatementStatement

The cash flow statement should report cash flows during the period classified by

Operating,

Investing and

Financing activities. Sum of these three types of cash flow reflect net

increase or decrease of cash and cash equivalents.

7-13

OperatingOperating Activities Activities

These are principal revenue producing activities of the enterprise.

Examples: Cash receipts from sale of goods / rendering

services; Cash receipts from royalties, fees,

commissions and other revenue; Cash payments to suppliers of goods and

service; Cash payments to and on behalf of employees.

7-14

InvestmentInvestment Activities Activities The activities of acquisition and disposal

of long term assets and other investments not included in cash equivalent are investing activities.

It includes making and collecting loans, acquiring and disposal of debt and equity instruments, property and fixed assets etc.

Examples of cash flows arising from investing activities are as follows:

7-15

InvestmentInvestment Activities Activities Examples of investing activities are

as follows: Cash payments to acquire fixed assets Cash receipts from disposal of fixed assets Cash payments to acquire shares,

warrants or debt instruments of other enterprises and interest in joint ventures

Cash receipt from disposal of above investments

7-16

Financing Financing ActivitiesActivities

Those activities that result in changes in size and composition of owners capital and borrowing of the organization.

It includes receipts from issuing shares, debentures, bonds, borrowing and payment of borrowed amount, loan etc. Sale of share Buy back of shares Redemption of preference shares Issue / redemption of debentures Long term loan / payment thereof Dividend / interest paid

7-17

Cash flowCash flow from operating from operating activitiesactivities

It can be derived either from direct method or indirect method

Direct method:

In this method, gross receipts and gross payments of cash are disclosed

Indirect method:

In this method, profit and loss account is adjusted for the effects of transaction of non-cash nature.

7-18

InterestInterest

Interest Received Received from investment – it is in investment activities Received from short term investment classified, as cash

equivalents should be considered as cash inflows from operating activities.

Received on trade advances and operating receivables should be in operating activities

Interest Paid On loans / debts are in financing activities On working capital loan and any other loan taken to

finance operating activities are in operating activities Cash flow from interest should be separately disclosed.

7-19

DividendDividend

Dividend Received

For financial enterprises – in operating activities

For other than financial enterprises – in investing activities

Dividend Paid

Always classified as financing activities

Cash flow from dividend should be separately disclosed

7-20

ForeignForeign currency transaction currency transaction

The effect of change in exchange rate in cash and cash equivalents held in foreign currency should be reported as separate part of the reconciliation of cash and cash equivalents.

Unrealized gain and losses arising from changes in foreign exchanges rates are not cash flows.

7-21

ExtraordinaryExtraordinary items items

The cash flows associated with extraordinary items should be classified as arising from:

Operating

Investing or

Financing activities

as appropriate and separately disclosed.

7-22

Treatment Treatment of taxof tax

Cash flow for tax payments / refund should be classified as cash flow from operating activities.

If cash flow can be specifically identified as cash flow from investment / financing activities, appropriate classification should be made.

7-23

InvestmentsInvestments in subsidiaries, in subsidiaries, associatesassociates and joint ventures and joint ventures

Only the cash flow between itself and the investee is required to be reported

Example:

Cash flow relating to dividends and advances

7-24

Acquisitions Acquisitions and disposals of and disposals of subsidiariessubsidiaries and other business and other business unitsunits Cash flow on acquisition and disposal of subsidiaries and

other business units should be :

Presented separately

Classified as investing activities

Total purchase and disposal should be disclosed separately

The position of the purchase / disposal consideration discharged by means of cash and cash equivalents should be disclosed

7-25

NonNon-cash transactions-cash transactions

These should be excluded from the cash flow statement These transactions should be disclosed in the financial

statements. Examples

Acquisition of assets by assuming directly related liabilities

Acquisition of an enterprise by means of issue of equity sshares

Conversion of debt to equity

7-26

DisclosuresDisclosures of cash and cash of cash and cash equivalentsequivalents

The components of cash and cash equivalents should be disclosed

Reconciliation of the amount in the cash flow statement with the equivalent items reported in the balance sheet

The amount of cash and cash equivalent balance held by the enterprises that are not available for use (with explanation by management)

7-27

ANALYSINGANALYSING THE CASH FLOWTHE CASH FLOW Statements of cash flows help users:

To evaluate a company’s ability to generate positive cash flows

meet its obligations to shareholders, creditors and governments

assess a company’s solvency and need for external financing

explain variances between reported accrual profit and cash flows from operating activities

Single statements are of limited use, a useful analysis requires statements covering five or more years.

7-28

Statement of Cash Flows:

The connection between two successive balance sheets & the statement of cash flows can be shown :

a. Assets = Liabilities Owners’ equity b. Cash Noncash assets = Liabilities Owners’ equity

c. Cash = Liabilities Noncash assets Owners’ equity

d. Cash = Liab Noncash assets Owners’ equity

7-29

II. Statement of Cash Flows:

Cash = Liab – Noncash assets Owners’ equity

The cash flow statement simultaneously provides an explanation of why a firm’s cash position has changed between successive balance sheet dates and explains changes that have taken place in the firm’s noncash asset, liability, and stockholders’ equity accounts over the same time period.

7-30

II. Statement of Cash Flows:

The change in a firm’s cash position between successive balance sheet dates will not equal the reported earnings for that period.

7-31

Flow of FundsFlow of Funds Statement StatementFlow of FundsFlow of Funds Statement Statement

Has been replaced by the cash flow cash flow statementstatement (1989) in U.S. audited annual

reports.

Has been replaced by the cash flow cash flow statementstatement (1989) in U.S. audited annual

reports.

A summary of a firm’s changes in financial position from one period to

another; it is also called a sources and uses of funds statement or a statement

of changes in financial position.

A summary of a firm’s changes in financial position from one period to

another; it is also called a sources and uses of funds statement or a statement

of changes in financial position.

7-32

Flow of FundsFlow of Funds Statement StatementFlow of FundsFlow of Funds Statement Statement

All of the firm’s investments and claims against those investments.

Extends beyond just beyond just transactions involving cashcash.

All of the firm’s investments and claims against those investments.

Extends beyond just beyond just transactions involving cashcash.

What are “fundsfunds”?

7-33

Sources and Sources and Uses StatementUses StatementSources and Sources and Uses StatementUses Statement

The letters labeling the boxes stand for UUsesses, SSourcesources, AAssetsssets, and LLiabilitiesiabilities (broadly defined). The pluses (minuses) indicate increases (decreases) in assets or liabilities.

The letters labeling the boxes stand for UUsesses, SSourcesources, AAssetsssets, and LLiabilitiesiabilities (broadly defined). The pluses (minuses) indicate increases (decreases) in assets or liabilities.

AA LL

- +

+ -

SS

UU

7-34

BW’s Determination BW’s Determination of Sources and Usesof Sources and UsesBW’s Determination BW’s Determination of Sources and Usesof Sources and Uses

$ 100 - S 410 - S 616 + U 5 -- 9 + U$ 1,140$ 1,140 N/A 930 N/A (299) N/A$ 631$ 631 + U 50 -- 223 --$ 2,044$ 2,044

$ 100 - S 410 - S 616 + U 5 -- 9 + U$ 1,140$ 1,140 N/A 930 N/A (299) N/A$ 631$ 631 + U 50 -- 223 --$ 2,044$ 2,044

Cash and C.E. $ 90 Acct. Rec. 394 Inventories 696 Prepaid Exp 5 Accum Tax Prepay 10 Current AssetsCurrent Assets $ $ 1,195 1,195 Fixed Assets (@Cost) 1030 Less: Acc. Depr. (329) Net Fix. AssetsNet Fix. Assets $ 701 $ 701 Investment, LT 50 Other Assets, LT 223

Total AssetsTotal Assets $ 2,169$ 2,169

Assets 2007 2006 +/- S/UAssets 2007 2006 +/- S/U

7-35


$ 100 $10 S 410 16 S 616 80 U 5 -- 9 1 U

$ 1,140$ 1,140 N/A 930 N/A (299) N/A$ 631$ 631 70 U 50 -- 223 --$ 2,044$ 2,044

$ 100 $10 S 410 16 S 616 80 U 5 -- 9 1 U

$ 1,140$ 1,140 N/A 930 N/A (299) N/A$ 631$ 631 70 U 50 -- 223 --$ 2,044$ 2,044

Cash and C.E. $ 90 Acct. Rec. 394 Inventories 696 Prepaid Exp 5 Accum Tax Prepay 10 Current AssetsCurrent Assets $ $ 1,195 1,195 Fixed Assets (@Cost) 1030 Less: Acc. Depr. (329) Net Fix. AssetsNet Fix. Assets $ 701 $ 701 Investment, LT 50 Other Assets, LT 223

Total AssetsTotal Assets $ 2,169$ 2,169

Assets 2007 2006 +/- S/UAssets 2007 2006 +/- S/U

7-36


$ 295 - U 94 -- 16 -- 100 --$$ 505505 N/A

453 + S 200 -- 729 -- 157 + S$ $ 1086 1086 N/A$ 2,044$ 2,044

$ 295 - U 94 -- 16 -- 100 --$$ 505505 N/A

453 + S 200 -- 729 -- 157 + S$ $ 1086 1086 N/A$ 2,044$ 2,044

Notes Payable $ 290 Acct. Payable 94 Accrued Taxes 16 Other Accrued Liab. 100

Current Liab.Current Liab. $ 500 $ 500 Long-Term Debt 530 Shareholders’ Equity Com. Stock ($1 par) 200 Add Pd in Capital 729 Retained Earnings 210

Total EquityTotal Equity $ $ 1,1391,139 Total Liab/EquityTotal Liab/Equity $ $ 2,1692,169

Liabilities and Equity 2007 2006 +/- S/ULiabilities and Equity 2007 2006 +/- S/U

7-37


$ 295 $ 5 U 94 -- 16 -- 100 --$$ 505505 N/A

453 77 S 200 -- 729 -- 157 53 S$ $ 1086 1086 N/A$ 2,044$ 2,044

$ 295 $ 5 U 94 -- 16 -- 100 --$$ 505505 N/A

453 77 S 200 -- 729 -- 157 53 S$ $ 1086 1086 N/A$ 2,044$ 2,044

Notes Payable $ 290 Acct. Payable 94 Accrued Taxes 16 Other Accrued Liab. 100

Current Liab.Current Liab. $ 500 $ 500 Long-Term Debt 530 Shareholders’ Equity Com. Stock ($1 par) 200 Add Pd in Capital 729 Retained Earnings 210

Total EquityTotal Equity $ $ 1,1391,139 Total Liab/EquityTotal Liab/Equity $ $ 2,1692,169

Liabilities and Equity 2007 2006 +/- S/ULiabilities and Equity 2007 2006 +/- S/U

7-38

USESUSES $156$156

Increase, Inventories $80

Increase, Accum Tax Prepay 1

Decrease, Notes Payable 5

Increase, Net Fixed Assets 70

$156$156

USESUSES $156$156

Increase, Inventories $80

Increase, Accum Tax Prepay 1


Increase, Net Fixed Assets 70

$156$156

SOURCESSOURCES

Increase, Retained Earnings $ 53

Decrease, Accounts Receivable 16

Increase, Long-Term Debt 77

Decrease, Cash + Cash Equivalents 10

““Basic” Sources Basic” Sources and Uses Statementand Uses Statement““Basic” Sources Basic” Sources and Uses Statementand Uses Statement

7-39

Adjusting the “Basic” Adjusting the “Basic” Sources and Uses StatementSources and Uses StatementAdjusting the “Basic” Adjusting the “Basic” Sources and Uses StatementSources and Uses Statement

The following three slides are Basket Wonders’ Balance Sheet and Income Statement that was

discussed in Chapter 6.

This information will be needed to adjust the “basic” Sources

and Uses Statement.

The following three slides are Basket Wonders’ Balance Sheet and Income Statement that was

discussed in Chapter 6.

This information will be needed to adjust the “basic” Sources

and Uses Statement.

7-40

Basket Wonders’ Balance Basket Wonders’ Balance Sheet (Asset Side)Sheet (Asset Side)Basket Wonders’ Balance Basket Wonders’ Balance Sheet (Asset Side)Sheet (Asset Side)

a. How the firm stands on a specific date.

b. What BW owned.c. Amounts owed by

customers.d. Future expense items

already paid.e. Cash/likely convertible

to cash within 1 year.f. Original amount paid.g. Acc. deductions for

wear and tear.

a. How the firm stands on a specific date.

b. What BW owned.c. Amounts owed by

customers.d. Future expense items

already paid.e. Cash/likely convertible

to cash within 1 year.f. Original amount paid.g. Acc. deductions for

wear and tear.

Cash and C.E. $ 90 Acct. Rec.cc 394 Inventories 696 Prepaid Exp dd 5 Accum Tax Prepay 10 Current AssetsCurrent Assetsee $1,195 $1,195 Fixed Assets (@Cost)ff 1030 Less: Acc. Depr. gg (329)

Net Fix. AssetsNet Fix. Assets $ 701 $ 701 Investment, LT 50 Other Assets, LT 223

Total AssetsTotal Assetsbb $2,169 $2,169

Basket Wonders Balance Sheet (thousands) Dec. 31, 2007Basket Wonders Balance Sheet (thousands) Dec. 31, 2007a

7-41

Basket Wonders’ Balance Basket Wonders’ Balance Sheet (Liability Side)Sheet (Liability Side)Basket Wonders’ Balance Basket Wonders’ Balance Sheet (Liability Side)Sheet (Liability Side)

a. Note, Assets = Liabilities + Equity.

b. What BW owed and ownership position.

c. Owed to suppliers for goods and services.

d. Unpaid wages, salaries, etc.

e. Debts payable < 1 year.f. Debts payable > 1 year.g. Original investment. h. Earnings reinvested.

a. Note, Assets = Liabilities + Equity.

b. What BW owed and ownership position.

c. Owed to suppliers for goods and services.

d. Unpaid wages, salaries, etc.

e. Debts payable < 1 year.f. Debts payable > 1 year.g. Original investment. h. Earnings reinvested.

Notes Payable $ 290 Acct. Payablecc 94 Accrued Taxes dd 16 Other Accrued Liab. dd 100 Current Liab.Current Liab. ee $ $ 500 500 Long-Term Debt ff

530 Shareholders’ Equity Com. Stock ($1 par) gg 200 Add Pd in Capital gg

729 Retained Earnings hh 210 Total Total EquityEquity $ $1,1391,139

Total Liab/EquityTotal Liab/Equitya,ba,b $2,169 $2,169

Basket Wonders Balance Sheet (thousands) Dec. 31, 2007Basket Wonders Balance Sheet (thousands) Dec. 31, 2007

7-42

Basket Wonders’ Basket Wonders’ Income StatementIncome StatementBasket Wonders’ Basket Wonders’ Income StatementIncome Statement

a. Measures profitability over a time period.

b. Received, or receivable, from customers.

c. Sales comm., adv., officer’s salaries, etc.

d. Operating income.e. Cost of borrowed funds.f. Taxable income.g. Amount earned for

shareholders.

a. Measures profitability over a time period.

b. Received, or receivable, from customers.

c. Sales comm., adv., officer’s salaries, etc.

d. Operating income.e. Cost of borrowed funds.f. Taxable income.g. Amount earned for

shareholders.

Net Sales $ 2,211 Cost of Goods Sold bb 1,599

Gross Profit $ 612 SG&A Expenses c c 402 EBITd $ 210 Interest Expensee 59 EBT f f $ 151 Income Taxes 60 EATg $ 91 Cash Dividends 38 Increase in REIncrease in RE $ 53 $ 53

Basket Wonders Statement of Earnings (in thousands) Basket Wonders Statement of Earnings (in thousands) for Year Ending December 31, 2007for Year Ending December 31, 2007a

7-43


Recognize Profits and DividendsRecognize Profits and Dividends

Change in retained earnings is composed of profits and dividends.

Source: Net Profit $91

Less Use: Cash Dividends 38

(Net) Source: Incr., R.E.(Net) Source: Incr., R.E. $53$53

Recognize Profits and DividendsRecognize Profits and Dividends

Change in retained earnings is composed of profits and dividends.

Source: Net Profit $91

Less Use: Cash Dividends 38

(Net) Source: Incr., R.E.(Net) Source: Incr., R.E. $53$53

7-44


Recognize Depreciation and Gross Recognize Depreciation and Gross Changes in Fixed AssetsChanges in Fixed Assets

Change in net fixed assets is composed of depreciation and fixed assets.

Source: Depreciation $ 30

Less Use: Add. to F.A. 100

(Net) Use: Incr., Net F.A. (Net) Use: Incr., Net F.A. $ 70$ 70

Recognize Depreciation and Gross Recognize Depreciation and Gross Changes in Fixed AssetsChanges in Fixed Assets

Change in net fixed assets is composed of depreciation and fixed assets.

Source: Depreciation $ 30

Less Use: Add. to F.A. 100

(Net) Use: Incr., Net F.A. (Net) Use: Incr., Net F.A. $ 70$ 70

7-45

SOURCESSOURCES

Funds provided by operations

Net Profit $ 91

Depreciation 30

Decrease, Accounts Receivable 16

Increase, Long-Term Debt 77

Decrease, Cash + Cash Equivalents 10

$224$224

Sources and Uses Sources and Uses Statement (Sources Side)Statement (Sources Side)Sources and Uses Sources and Uses Statement (Sources Side)Statement (Sources Side)

7-46

USESUSES

Dividends $ 38

Additions to fixed assets 100

Increase, Inventories 80

Increase, Accum. Tax Prepay 1


$224$224

Sources and Uses Sources and Uses Statement (Uses Side)Statement (Uses Side)Sources and Uses Sources and Uses Statement (Uses Side)Statement (Uses Side)

7-47

Analyzing the Sources Analyzing the Sources and Uses Statementand Uses StatementAnalyzing the Sources Analyzing the Sources and Uses Statementand Uses Statement

UsesUses

Primarily through an increase in

inventories and expenditures on capital assets.

UsesUses

Primarily through an increase in

inventories and expenditures on capital assets.

SourcesSources

Primarily through net profit from

operations and long-term debt

increases.

7-48

Statement of Cash FlowsStatement of Cash FlowsStatement of Cash FlowsStatement of Cash Flows

operating activitiesoperating activities,

investing activitiesinvesting activities, and

financing activitiesfinancing activities.

operating activitiesoperating activities,

investing activitiesinvesting activities, and

financing activitiesfinancing activities.

This statement reports cash inflowsinflows and outflowsoutflows based on the firm’s

A summary of a firm’s payments during a period of time.

7-49

Statement of Cash FlowsStatement of Cash Flows

Cash Flow from Operating Activities

Shows impact of transactions not defined as investing or financing

activities.

These cash flows are generally the cash effects of transactions that enter into the determination of net income.

7-50

Cash Flow From Cash Flow From Operating ActivitiesOperating Activities

Cash InflowsCash InflowsFrom sales of goods or servicesFrom interest and dividend income

Cash OutflowsCash OutflowsTo pay suppliers for inventoryTo pay employees for servicesTo pay lenders (interest)To pay government for taxesTo pay other suppliers for other

operating expenses

7-51

Cash Flow From Cash Flow From Operating ActivitiesOperating Activities

It would seem more logical to classify interest and dividend income as an

“investing” inflow, while interest paid certainly looks like a “financing”

outflow.

But, the U.S. Financial Accounting Standards Board -- by a slim 4 to 3 vote -- classified these

items as “operating” flows.

7-52

Statement of Cash FlowsStatement of Cash FlowsStatement of Cash FlowsStatement of Cash Flows

Cash Flow from Financing ActivitiesCash Flow from Financing Activities Shows impact of all cash transactions with shareholders and the borrowing

and repaying transactions with lenders.

Cash Flow from Financing ActivitiesCash Flow from Financing Activities Shows impact of all cash transactions with shareholders and the borrowing

and repaying transactions with lenders.

Cash Flow from Investing ActivitiesCash Flow from Investing Activities

Shows impact of buying and selling fixed assets and debt or equity

securities of other entities.

7-53

Cash Flow From Cash Flow From Investing ActivitiesInvesting Activities

Cash InflowsCash InflowsFrom sale of fixed assets (property, plant,

equipment)From sale of debt or equity securities (other

than common equity) of other entities

Cash OutflowsCash OutflowsTo acquire fixed assets (property, plant,

equipment)To purchase debt or equity securities (other

than common equity) of other entities

7-54

Cash Flow From Cash Flow From Financing ActivitiesFinancing Activities

Cash InflowsCash InflowsFrom borrowingFrom the sale of the firm’s own equity

securities

Cash OutflowsCash OutflowsTo repay amounts borrowedTo repurchase the firm’s own equity

securitiesTo pay shareholders dividends

7-55

Indirect Method -- Indirect Method -- Statement of Cash FlowsStatement of Cash Flows

Cash Flow from Operating ActivitiesCash Flow from Operating Activities

Net Income $ 91Depreciation 30Decrease, accounts receivable 16Increase, inventories ( 80)Increase, accum. tax prepay ( 1)

Net cash provided (used) byNet cash provided (used) by operating activitiesoperating activities $ 56$ 56

7-56


Cash Flow from Investing ActivitiesCash Flow from Investing Activities

Additions to Fixed Assets$(100)

Net cash provided (used) byNet cash provided (used) by investing activitiesinvesting activities $(100)$(100)

7-57


Cash Flow from Financing ActivitiesCash Flow from Financing Activities

Increase, notes payable $ ( 5)

Increase, long-term debt 77Dividends paid ( 38)

Net cash provided (used) by Net cash provided (used) by financing financing activitiesactivities $ 34$ 34

7-58


Increase (decrease) in cash Increase (decrease) in cash and cash equivalents and cash equivalents $ ( 10)$ ( 10)Cash and cash equivalents, 2006 Cash and cash equivalents, 2006 100 100Cash and cash equivalents, 2007 Cash and cash equivalents, 2007 $ 90$ 90

Supplemental cash flow disclosuresInterest paid $ 59Taxes paid 60

cash flow good(three)

Documents

notes payable increase

payable accrued taxes

cash flowscash flow

accounts receivable increase

acquire fixed assets

term debt decrease

firms cash position

cash flow statement