The document analyzes cash flow statements and how they segregate cash flows from operating, investing, and financing activities. It provides examples of inflows and outflows for each category on a cash flow statement, including sales and expenses for operating cash flows, purchases and sales of property for investing cash flows, and loans and dividends for financing cash flows. It demonstrates how to analyze a sample cash flow statement for a company.

1. Analyzing Cash Flow
Objective: To show how cash flow statements segregate operating, investing
and financing transactions and to understand how cash flow information
can help make better management and investing decisions.
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2. The Cash Flow Statement
Operating Investing Financing
Cash Flow Cash Flow Cash Flow
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3. The Cash Flow Statement
Inflows: Outflows:
• Sales Operating • Raw materials
• Receivables paid purchased
Cash Flow
• Salaries
• Rent
• Interest on loans
• Taxes
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4. The Cash Flow Statement
Star Hat Store Cash Flow Statement
Year Ending Year Ending
31-Dec-2011 31-Dec-2010
Operating Cash Flows
Sales 99,000 62,000
Accounts Receivables collected 25,000 8,000
Hats bought from Manufacturer (86,000) (60,000)
Salaries (10,000) (8,000)
Interest on Loans (8,000) -
Selling General and Admin (5,000) (24,000)
Taxes Paid (2,400) (300)
Cash Flow from Operations 12,600 (22,300)
Investing Cash Flows
Purchase of Truck (32,000)
Purchase of Display Case (60,000) -
Cash Flow from Investing (60,000) (32,000)
Financing Cash Flows
Partner investment - 150,000
Loan from bank 60,000 -
Cash flow from Financing 60,000 150,000
Net Cash Flow 12,600 95,700
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5. Cash Flow vs. Income Statement
Star Hat Store Cash Flow Statement Star Hat Store Income Statement
Year Ending Year Ending Year Ending Year Ending
31-Dec-2011 31-Dec-2010 31-Dec-2011 31-Dec-2010
Operating Cash Flows
Sales 99,000 62,000 Sales 100,000 80,000
Accounts Receivables collected 25,000 8,000 Cost of Goods Sold - 65,000 55,000
Hats bought from Manufacturer (86,000) (60,000)
Salaries (10,000) (8,000) Gross Income = 35,000 25,000
Interest on Loans (8,000) - Selling General and - 15,000 15,000
Selling General and Admin (5,000) (24,000) Admin Expenses
Taxes Paid (2,400) (300)
Cash Flow from Operations 12,600 (22,300) Operating Income = 20,000 10,000
Other Income and Exp - 8,000 8,000
Investing Cash Flows
Purchase of Truck (32,000) Pre-Tax Income = 12,000 2,000
Purchase of Display Case (60,000) - Taxes - 2,400 400
Cash Flow from Investing (60,000) (32,000)
Net Income = 9,600 1,600
Financing Cash Flows
Partner investment - 150,000
Loan from bank 60,000 -
Cash flow from Financing 60,000 150,000
Net Cash Flow 12,600 95,700
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6. The Cash Flow Statement
Inflows: Outflows:
• Sale of real estate Investing • Purchase of real
• Sales of Cash Flow estate
plant/equipment • Purchase of
• Sale of financial plant/equipment
investments • Purchase of financial
• Payments related to investments
mergers or
acquisitions
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7. The Cash Flow Statement
Star Hat Store Cash Flow Statement
Year Ending Year Ending
31-Dec-2011 31-Dec-2010
Operating Cash Flows
Sales 99,000 62,000
Accounts Receivables collected 25,000 8,000
Hats bought from Manufacturer (86,000) (60,000)
Salaries (10,000) (8,000)
Interest on Loans (8,000) -
Selling General and Admin (5,000) (24,000)
Taxes Paid (2,400) (300)
Cash Flow from Operations 12,600 (22,300)
Investing Cash Flows
Purchase of Truck (32,000)
Purchase of Display Case (60,000) -
Cash Flow from Investing (60,000) (32,000)
Financing Cash Flows
Partner investment - 150,000
Loan from bank 60,000 -
Cash flow from Financing 60,000 150,000
Net Cash Flow 12,600 95,700
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8. The Cash Flow Statement
Inflows: Outflows:
• Cash invested by Financing • Dividends paid
owners • Loans given
• Cash from stock Cash Flow
• Stock repurchased
offerings
• Loans received
• Cash from bonds
issued
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9. The Cash Flow Statement
Star Hat Store Cash Flow Statement
Year Ending Year Ending
31-Dec-2011 31-Dec-2010
Operating Cash Flows
Sales 99,000 62,000
Accounts Receivables collected 25,000 8,000
Hats bought from Manufacturer (86,000) (60,000)
Salaries (10,000) (8,000)
Interest on Loans (8,000) -
Selling General and Admin (5,000) (24,000)
Taxes Paid (2,400) (300)
Cash Flow from Operations 12,600 (22,300)
Investing Cash Flows
Purchase of Truck (32,000)
Purchase of Display Case (60,000) -
Cash Flow from Investing (60,000) (32,000)
Financing Cash Flows
Partner investment - 150,000
Loan from bank 60,000 -
Cash flow from Financing 60,000 150,000
Net Cash Flow 12,600 95,700
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10. The Cash Flow Statement
Star Hat Store Cash Flow Statement
Year Ending Year Ending
31-Dec-2011 31-Dec-2010
Operating Cash Flows
Sales 99,000 62,000
Accounts Receivables collected 25,000 8,000
Hats bought from Manufacturer (86,000) (60,000)
Salaries (10,000) (8,000)
Interest on Loans (8,000) -
Selling General and Admin (5,000) (24,000)
Taxes Paid (2,400) (300)
Cash Flow from Operations 12,600 (22,300)
Investing Cash Flows
Purchase of Truck (32,000)
Purchase of Display Case (60,000) -
Cash Flow from Investing (60,000) (32,000)
Financing Cash Flows
Partner investment - 150,000
Loan from bank 60,000 -
Cash flow from Financing 60,000 150,000
Net Cash Flow 12,600 95,700
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11. The Cash Flow Statement
ABC Company Cash Flow Statement
Year Ending Year Ending
31-Dec-2011 31-Dec-2010
Operating Cash Flows
Net Income 1,890,000 1,622,000
Additions to Cash
Depreciation 14,000 13,500
Decrease in Accounts Receivable 12,500 36,000
Increase in Accounts Payable 24,000 44,800
Increase in Taxes Payable 2,000 1,700
Subtractions from Cash
Increase in Inventory (32,000) (55,000)
Cash Flow from Operations 1,910,500 1,663,000
Investing Cash Flows
Purchase of Equipment (76,000) (225,000)
Sale of Equipment 69,200 -
Cash Flow from Investing (6,800) (225,000)
Financing Cash Flows
Loan from bank 85,000 -
Dividends paid (44,000) 44,000
Cash from Financing 41,000 44,000
Net Cash Flow 1,944,700 1,482,000
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