Professional Documents
Culture Documents
Amortization
The noncash charge similar to depreciation
except that it is use to write off the costs of
intangible assets (patents, copyrights, trademarks
and goodwill.)
Working Capital (WC)
also known as net working capital, or working capital
ratio, is a measure of both a company's efficiency and
its short-term financial health. The working capital
ratio is calculated as:
FIXED ASSETS
purchasing or acquisition cash is reduced
selling cash is increased
Financing activities
include raising cash by issuing short term debt, long
term debt, or stock, or using cash to pay dividends or
to buy back outstanding stocks or bonds
Current liabilities
Current assets
Long-term
liabilities Financing cash
Long-term assets Stockholders flows
Equity
Investing cash
flows
Its main advantages are as follows:
(ii) A Control Device. Cash Flow statement is also a control device for the
management. A comparison of cash flow statement of previous year with
the budget for that year would indicate to what extent the resources of the
enterprise were raised an applied according to the plan. Thus a
comparison of original forecast with actual results may highlights trends of
movement that might otherwise go undetected.
(iii) Useful to internal Financial Management. Since it gives a clear
picture of cash inflow from operations (and not income flow of operation),
it is, therefore, very useful to internal financial management in
considering the possibility of retiring ling-term debts, in planning
replacement of plant facilities or in formulating dividend policies.
You are the owner of a garment company and was wondering how cash
flowed on your operations. Your Accountant gave you the January and
December balance.
Recall:
Recall:
Recall:
Investing
Equipment (250,000.00) (250,000.00)
Financing
Bonds Payable (36,000.00)
LT Bank Borrowing 54,000.00
Common Stock 78,000.00
Dividends (51,000.00) 45,000.00
Net Decrease in Cash (24,000.00)
Cash and Cash Equivalents (Jan.1) 62,000.00
Cash and Cash Equivalents (Dec.31) 38,000.00
CASH FLOW STATEMENT
EXAMPLE
You are the owner of a garment company and was wondering how cash
flowed on your operations. Your Accountant gave you the January and
December balance sheets and relayed that you had a net profit of $ 193,000
for the year.
Assets JANUARY DECEMBER
Cash 62,000.00 38,000.00
Accounts Receivable 73,000.00 108,000.00
Inventories 136,000.00 222,000.00
Prepaid Expenses 41,000.00 13,000.00
Current Assets 312,000.00 381,000.00
Equipment 236,000.00 486,000.00
Less: Depreciation 73,000.00 121,000.00
Net, Equipment 163,000.00 365,000.00
TOTAL 475,000.00 746,000.00
Liabilities and Stockholders Equity
Accounts Payable 76,000.00 85,000.00
Other current liabilities 32,000.00 56,000.00
Bonds Payable 56,000.00 20,000.00
Long-term bank borrowing 35,000.00 89,000.00
Common stock 125,000.00 203,000.00
Retained Earnings 151,000.00 293,000.00
TOTAL 475,000.00 746,000.00
CASH FLOW STATEMENT
EXAMPLE
You are the owner of a garment company and was wondering how cash
flowed on your operations. Your Accountant gave you the January and
December balance sheets and relayed that you had a net profit of $ 193,000
for the year.
Assets JANUARY DECEMBER
Cash 62,000.00 38,000.00
Accounts Receivable 73,000.00 108,000.00
Inventories 136,000.00 222,000.00
Prepaid Expenses 41,000.00 13,000.00
Current Assets 312,000.00 381,000.00
Residual
+ depreciation