The document discusses the statement of cash flows, which reports a company's cash inflows and outflows during an accounting period. It has three sections - operating, investing, and financing activities. The statement of cash flows helps investors understand a company's ability to generate cash flows, meet obligations, and need for external financing by reporting cash receipts, payments and transactions. It must be prepared using the direct or indirect method, with the direct method showing actual cash amounts for items like cash received from customers and cash paid to suppliers.

1. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
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STATEMENT OF CASH
FLOWS
Chapter
13

2. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
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3-2
Provides information about the cash receipts
and cash payments of a business entity
during the accounting period.
Provides information about the cash receipts
and cash payments of a business entity
during the accounting period.
Helps investors with questions about the
company’s:
Ability to generate positive cash flows.
Ability to meet its obligations and to pay
dividends.
Need for external financing.
Investing and financing transactions for the
period.
Helps investors with questions about the
company’s:
Ability to generate positive cash flows.
Ability to meet its obligations and to pay
dividends.
Need for external financing.
Investing and financing transactions for the
period.
Purpose of the Statement of Cash
Flows
Purpose of the Statement of Cash
Flows

3. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
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4. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
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The Statement of Cash Flows must
include the following three sections:
Cash Flows from Operating
Activities
Cash Flows from Investing Activities
Cash Flows from Financing
Activities
The Statement of Cash Flows must
include the following three sections:
Cash Flows from Operating
Activities
Cash Flows from Investing Activities
Cash Flows from Financing
Activities
Classification of Cash FlowsClassification of Cash Flows

5. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
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Outflows to:
Suppliers of merchandise
and services.
Employees.
Lenders for interest.
Governments for taxes.
Outflows to:
Suppliers of merchandise
and services.
Employees.
Lenders for interest.
Governments for taxes.
Inflows from:
Sales to customers.
Interest and dividends
received.
Inflows from:
Sales to customers.
Interest and dividends
received.
Cash
Flows
from
Operating
Activities
Cash
Flows
from
Operating
Activities
+
_
Operating ActivitiesOperating Activities

6. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
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Cash
Flows
from
Investing
Activities
Cash
Flows
from
Investing
Activities
+
_
Inflows from:
Selling investments and plant
assets.
Collecting of principal on loans.
Inflows from:
Selling investments and plant
assets.
Collecting of principal on loans.
Outflows to:
Payments to acquire
investments and plant assets.
Purchase debt or equity
investments.
Make loans.
Outflows to:
Payments to acquire
investments and plant assets.
Purchase debt or equity
investments.
Make loans.
Investing ActivitiesInvesting Activities

7. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
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+
_
Inflows from:
Short-term and long-term
borrowing.
Owners (for example, from
issuing stock).
Inflows from:
Short-term and long-term
borrowing.
Owners (for example, from
issuing stock).
Outflows to:
Repayments of borrowed
funds.
Owners for dividends.
Purchase treasury stock.
Outflows to:
Repayments of borrowed
funds.
Owners for dividends.
Purchase treasury stock.
Financing ActivitiesFinancing Activities
Cash
Flows
from
Financing
Activities
Cash
Flows
from
Financing
Activities

8. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
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Cash
Equivalents
CashCash
Currency
Short-term, highly liquid investments.
Readily convertible into cash.
So near maturity that market value is unaffected by
interest rate changes.
Short-term, highly liquid investments.
Readily convertible into cash.
So near maturity that market value is unaffected by
interest rate changes.
Cash and Cash EquivalentsCash and Cash Equivalents

9. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
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The operating
cash flows section
can be prepared
using either the
direct method or
the indirect
method.
The operating
cash flows section
can be prepared
using either the
direct method or
the indirect
method.
Let’s look at
the Direct
Method for
preparing the
Statement of
Cash Flows.

10. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
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Accrual basis revenue includes sales that
did not result in cash inflows.
Can be computed as:
Cash Received from
Customers
Cash Received from
Customers
Decrease in
receivables
Decrease in
receivables
Increase in
receivables
Increase in
receivables
+
– =
=
Net SalesNet Sales
Direct Method
Cash Received from Customers
Direct Method
Cash Received from Customers

11. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
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+
– =
=
The A/R balance was $80,000 on 12/31/02 and
$110,000 on 12/31/03. If accrual sales revenue
for 2003 was $900,000, what was cash basis
revenue?
The A/R balance was $80,000 on 12/31/02 and
$110,000 on 12/31/03. If accrual sales revenue
for 2003 was $900,000, what was cash basis
revenue?
Decrease in
receivables
Decrease in
receivables
Increase in
receivables
Increase in
receivables
Net Sales
$900,000
Net Sales
$900,000
Direct Method
Cash Received from Customers
Direct Method
Cash Received from Customers
Cash Received from
Customers
Cash Received from
Customers

12. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
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Cash Received from
Customers = $870,000
Cash Received from
Customers = $870,000
Decrease in
receivables
Decrease in
receivables
$30,000
Increase in
receivables
$30,000
Increase in
receivables– =
Net Sales
$900,000
Net Sales
$900,000
The A/R balance was $80,000 on 12/31/02 and
$110,000 on 12/31/03. If accrual sales revenue
for 2003 was $900,000, what was cash basis
revenue?
The A/R balance was $80,000 on 12/31/02 and
$110,000 on 12/31/03. If accrual sales revenue
for 2003 was $900,000, what was cash basis
revenue?
Direct Method
Cash Received from Customers
Direct Method
Cash Received from Customers

13. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
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Now that we
understand the
process, let’s look at
some simplified
formulas for
computing direct
method cash flows.

14. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
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Direct Method
Interest and Dividends Received
Direct Method
Interest and Dividends Received

15. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
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Step 1
Step 2
Direct Method
Cash Paid for Merchandise
Direct Method
Cash Paid for Merchandise

16. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
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How much did Lug Lite pay for inventory in
2003?
a. $900,000
b. $923,000
c. $947,000
d. $877,000
Inventory, 1/1/03 130,000$ A/P, 1/1/03 23,000$
Inventory, 12/31/03 165,000$ A/P, 12/31/03 35,000$
COGS, 12/31/03 900,000$
Direct Method
Cash Paid for Merchandise
Direct Method
Cash Paid for Merchandise
Purchases for 2003 were $935,000.
Purchases = $900,000 + $35,000
Cash Paid for Merchandise in 2003
was $923,000.
Cash Paid = $935,000 - $12,000
Purchases for 2003 were $935,000.
Purchases = $900,000 + $35,000
Cash Paid for Merchandise in 2003
was $923,000.
Cash Paid = $935,000 - $12,000

17. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
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After deducting depreciation and other
noncash expenses, the cash paid for expenses
is affected by
(1) whether the expense was prepaid, and
(2) whether the expense was accrued.
After deducting depreciation and other
noncash expenses, the cash paid for expenses
is affected by
(1) whether the expense was prepaid, and
(2) whether the expense was accrued.
Cash Paid for
Expenses
= Expenses
+ Increase in
prepaid expenses
- Decrease in
prepaid expenses
+ Decrease in
accrued liabilities
- Increase in
accrued liabilities
{ {
Direct Method
Cash Payments for Expenses
Direct Method
Cash Payments for Expenses

18. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
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Now, let’s
prepare a direct
method
Statement of
Cash Flows for
Grate Big
Company.

19. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
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Grate Big Company
Comparative Balance Sheets - Assets
December 31,
2002 2003
Cash 60,000$ 70,370$
Accounts Receivable, net 27,000 35,000
Inventory 230,000 200,000
Trading Securities - 25,000
Equipment, net 500,000 425,000
Investment in Tiny Co. 100,000 130,000
Total Assets 917,000$ 885,370$
Direct Method - ExampleDirect Method - Example

20. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
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Grate Big Company
Comparative Balance Sheets - Liabilities and Equity
December 31,
2002 2003
Accounts Payable 15,000$ 12,000$
Salaries Payable 7,000 5,000
Interest Payable 11,950 7,350
Income Tax Payable 20,000 17,000
Notes Payable, Bob's Bank 70,000 60,000
Bonds Payable 250,000 150,000
Premium on Bonds Payable 5,000 4,000
Common Stock 450,000 500,000
Retained Earnings 88,050 130,020
Total Liabilities and Equity 917,000$ 885,370$
Direct Method - ExampleDirect Method - Example

21. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
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Grate Big Company
Income Statement Amounts
For the Year Ending December 31, 2003
Sales Revenues 800,000$
Cost of Goods Sold 560,000
Depreciation Expense 5,000
Interest Expense 28,050
Income Tax Expense 27,980
Salary Expense 80,000
Other Expenses 71,000
Amortization of Bond Premium 1,000
Gain on Sale of Equipment 3,000
Extraordinary Loss 30,000
Equity in Investee Income 40,000
Net Income 41,970$
Direct Method - ExampleDirect Method - Example

22. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
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Direct Method - ExampleDirect Method - Example
Additional Information
 Trading Securities were purchased during 2003
at a cost of $25,000.
 Equipment with a book value of $40,000 was
sold during the year for $43,000.
 Equipment with a book value of $30,000 was
destroyed during a freak flood in 2003. There
was no insurance.
 Grate Big holds a 25% investment in Tiny Co.
and accounts for it using the Equity Method.
Additional Information
 Trading Securities were purchased during 2003
at a cost of $25,000.
 Equipment with a book value of $40,000 was
sold during the year for $43,000.
 Equipment with a book value of $30,000 was
destroyed during a freak flood in 2003. There
was no insurance.
 Grate Big holds a 25% investment in Tiny Co.
and accounts for it using the Equity Method.

23. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
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Direct Method - ExampleDirect Method - Example
Additional Information
 Grate Big’s tax rate is 40%.
 The Notes Payable to Bob’s Bank carry a 12%
rate. The payments are due on the first day of
each month.
 The Bonds Payable carry a 9% rate. Interest is
payable semiannually on July 1 & Jan. 1.
 Grate Big sold stock during 2001 for $50,000.
 Grate Big received $10,000 dividends from Tiny
Co.
Additional Information
 Grate Big’s tax rate is 40%.
 The Notes Payable to Bob’s Bank carry a 12%
rate. The payments are due on the first day of
each month.
 The Bonds Payable carry a 9% rate. Interest is
payable semiannually on July 1 & Jan. 1.
 Grate Big sold stock during 2001 for $50,000.
 Grate Big received $10,000 dividends from Tiny
Co.

24. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
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Salary Expense 80,000$ 2000
Add: Decrease in Salary Payable 2,000
Cash Paid to Employees 82,000$
Sales Revenues 800,000$
Less: Increase in A/R (8,000)
Cash Received from Customers 792,000$
Direct Method - ExampleDirect Method - Example
Cash Received from Customers
Cash Paid to Employees

25. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
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Interest Expense 28,050$ 2000
Add: Decrease in Interest Payable 4,600
Cash Paid for Interest 32,650$
Cost of Goods Sold 560,000$
Add : Decrease in A/P 3,000
Less: Decrease in Inventory (30,000)
Cash Paid for Inventory 533,000$
Direct Method - ExampleDirect Method - Example
Cash Paid for Inventory
Cash Paid for Interest

26. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
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Income Tax Expense 27,980$ 2000
Add: Decrease in Taxes Payable 3,000
Cash Paid for Taxes 30,980$
Direct Method - ExampleDirect Method - Example
Cash Paid for Taxes
Other Operating Cash Flows

27. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
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Direct Method - ExampleDirect Method - Example
Cash Flows From Operating Activities

28. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
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3-28
Grate Big Company
Statement of Cash Flows
For the Period Ending December 31, 2003
I. Operating Cash Flows 27,370$
II. Investing Cash Flows
Proceeds from sale of Equipment 43,000
III. Financing Cash Flows
Proceeds from sale of Stock 50,000$
Principal paid on Bonds (100,000)
Principal paid on Notes (10,000) (60,000)
Net Cash Flows for the Period 10,370$
Add: Beginning Cash Balance 60,000
Ending Cash Balance 70,370$
Equipment with a book value of
$40,000 was sold for $43,000.
Equipment with a book value of
$40,000 was sold for $43,000.
Notes Payable decreased from
$70,000 to $60,000 during 2003.
Notes Payable decreased from
$70,000 to $60,000 during 2003.
Bonds Payable decreased from
$250,000 to $150,000 during 2003.
Bonds Payable decreased from
$250,000 to $150,000 during 2003.

29. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
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Grate Big Company
Statement of Cash Flows
For the Period Ending December 31, 2003
I. Operating Cash Flows 27,370$
II. Investing Cash Flows
Proceeds from sale of Equipment 43,000
III. Financing Cash Flows
Proceeds from sale of Stock 50,000$
Principal paid on Bonds (100,000)
Principal paid on Notes (10,000) (60,000)
Net Cash Flows for the Period 10,370$
Add: Beginning Cash Balance 60,000
Ending Cash Balance 70,370$
Notice that the Ending
Cash Balance per the
Statement of Cash Flows
agrees with the 12/31/03
Cash balance on the
Balance Sheet.
Notice that the Ending
Cash Balance per the
Statement of Cash Flows
agrees with the 12/31/03
Cash balance on the
Balance Sheet.

30. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
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3-30
Let’s look at the
Indirect Method
that is used by
over 97% of all
companies.

31. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
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3-31
Net
Income
Net
Income
Cash Flows
from Operating
Activities
Cash Flows
from Operating
Activities
Indirect MethodIndirect Method
Changes in current assets and current
liabilities as shown on the following table.
Changes in current assets and current
liabilities as shown on the following table.
+ Losses and
- Gains
+ Losses and
- Gains
+ Noncash
expenses such as
depreciation and
amortization.
+ Noncash
expenses such as
depreciation and
amortization.

32. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
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Use this table when adjusting Net Income
to Operating Cash Flows.
Indirect MethodIndirect Method

33. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
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3-33
Let’s prepare a
complete
Statement of
Cash Flows
using the
Indirect Method.

34. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
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3-34
Joe’s Place has prepared the Balance Sheet
as of March 31, 2003, and March 31, 2002.
The Income Statement for the year ended
3/31/03 has also been prepared. Joe
needs help preparing the Statement of
Cash Flows.
Joe’s Place has prepared the Balance Sheet
as of March 31, 2003, and March 31, 2002.
The Income Statement for the year ended
3/31/03 has also been prepared. Joe
needs help preparing the Statement of
Cash Flows.
Joe’s
Place
Indirect Method - ExampleIndirect Method - Example

35. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
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3-35
Joe's Place
Income Statement
For the Year Ending 3/31/03
Revenues 727,000$
Operating Expenses (748,000)
Depreciation Expense (6,000)
Gain on Sale of Land 8,000
Net Loss (19,000)$
The $8,000 gain was the
result of selling land
costing $32,000 for $40,000
during the period.
The $8,000 gain was the
result of selling land
costing $32,000 for $40,000
during the period.
Indirect Method - ExampleIndirect Method - Example

36. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
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Indirect Method - ExampleIndirect Method - Example

37. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
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3-37
Joe’s Place issued $50,000
of no par common stock to
settle the $50,000 note
payable.
Joe’s Place issued $50,000
of no par common stock to
settle the $50,000 note
payable.
Indirect Method - ExampleIndirect Method - Example

38. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
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Indirect Method - ExampleIndirect Method - Example

39. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
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3-39
With the indirect method, always
start with the net income or net
loss for the period.
With the indirect method, always
start with the net income or net
loss for the period.
Indirect Method - ExampleIndirect Method - Example

40. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
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3-40
Indirect Method - ExampleIndirect Method - Example

41. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
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3-41
Accounts receivable decreased.
3/31/03 3/31/02
$23,000 - $40,000 = $(17,000)
Accounts receivable decreased.
3/31/03 3/31/02
$23,000 - $40,000 = $(17,000)
Indirect Method - ExampleIndirect Method - Example

42. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
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3-42
Accounts payable increased.
3/31/03 3/31/02
$38,000 - $27,000 = $11,000
Accounts payable increased.
3/31/03 3/31/02
$38,000 - $27,000 = $11,000
Indirect Method - ExampleIndirect Method - Example

43. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
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Inventory increased.
3/31/03 3/31/02
$350,000 - $300,000 = $50,000
Inventory increased.
3/31/03 3/31/02
$350,000 - $300,000 = $50,000
Indirect Method - ExampleIndirect Method - Example

44. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
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3-44
Salaries payable decreased.
3/31/03 3/31/02
$ 9,000 - $14,000 = $(5,000)
Salaries payable decreased.
3/31/03 3/31/02
$ 9,000 - $14,000 = $(5,000)
Indirect Method - ExampleIndirect Method - Example

45. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
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Add back non-cash expenses.Add back non-cash expenses.
Indirect Method - ExampleIndirect Method - Example

46. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
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Subtract gains.Subtract gains.
Indirect Method - ExampleIndirect Method - Example

47. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
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3-47
The operating cash
flows amount comes
from the schedule
just prepared.
The operating cash
flows amount comes
from the schedule
just prepared.
Indirect Method - ExampleIndirect Method - Example

48. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
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3-48
Land originally costing $32,000
was sold for $40,000.
Land originally costing $32,000
was sold for $40,000.
Indirect Method - ExampleIndirect Method - Example

49. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
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3-49
Dividends of $20,000 were paid to
owners during the year.
Dividends of $20,000 were paid to
owners during the year.
Indirect Method - ExampleIndirect Method - Example

50. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
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3-50
Compute the net change in cash
for the period.
Compute the net change in cash
for the period.
Indirect Method - ExampleIndirect Method - Example

51. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
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3-51
Complete the Statement of Cash
Flows by reconciling beginning
cash to ending cash.
Complete the Statement of Cash
Flows by reconciling beginning
cash to ending cash.
Indirect Method - ExampleIndirect Method - Example

52. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
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Note that the ending
cash amount ties
back to the Joe’s
Place Balance Sheet
at 3/31/03.
Note that the ending
cash amount ties
back to the Joe’s
Place Balance Sheet
at 3/31/03.
Indirect Method - ExampleIndirect Method - Example

53. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
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3-53
In addition, on the face
of the statement or in a
supplemental
schedule, disclose the
$50,000 noncash
financing activity.
In addition, on the face
of the statement or in a
supplemental
schedule, disclose the
$50,000 noncash
financing activity.
Indirect Method - ExampleIndirect Method - Example

54. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
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3-54
In addition, cash
interest payments and
cash tax payments
must also be disclosed
separately.
In addition, cash
interest payments and
cash tax payments
must also be disclosed
separately.
Indirect Method - ExampleIndirect Method - Example

55. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
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3-55
Cash Budgets are used by management to plan and
forecast future cash flows.
Cash Budgets are used by management to plan and
forecast future cash flows.
F o r c e m a n a g e m e n t t o c o o r d i n a t e a c t i v i t i e s .
P r o v i d e m a n a g e r s w i t h a d v a n c e n o t i c e o f a v a i l a b l e r e s o u r c e s .
P r o v i d e t a r g e t s u s e f u l i n e v a l u a t i n g p e r f o r m a n c e .
P r o v i d e a d v a n c e w a r n i n g s o f p o t e n t i a l c a s h s h o r t a g e s .
A C a s h B u d g e t c a n b e u s e d t o :
Managing Cash FlowsManaging Cash Flows

56. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
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Increase collection of accounts
receivables.
Keep inventory low.
Delay payment of liabilities.
Plan timing of major expenditures.
Invest idle cash.
Increase collection of accounts
receivables.
Keep inventory low.
Delay payment of liabilities.
Plan timing of major expenditures.
Invest idle cash.
Managing Cash FlowsManaging Cash Flows

57. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
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Cash Budgeting
Cash Budget
May June July August
Beginning cash balance 27,500$ 15,000$ -$ -$
Add: Cash receipts 3,500
Total available cash 31,000$
Less: Cash disbursements 16,000
Excess (deficiency) of
available cash over cash
disbursements 15,000$
Financing needed
Financing repayments -
Ending cash balance 15,000$
The ending cash balance of one month becomes the
beginning cash balance of the next month.
The ending cash balance of one month becomes the
beginning cash balance of the next month.

58. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
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Cash BudgetingCash Budgeting
Cash Budget
May June July August
Beginning cash balance 27,500$ 15,000$ 10,000$ 10,000$
Add: Cash receipts 3,500 2,000 9,000 14,000
Total available cash 31,000$ 17,000$ 19,000$ 24,000$
Less: Cash disbursements 16,000 18,000 6,000 8,000
Excess (deficiency) of
available cash over cash
disbursements 15,000$ (1,000)$ 13,000$ 16,000$
Financing needed 11,000 - -
Financing repayments - - 3,000 6,000
Ending cash balance 15,000$ 10,000$ 10,000$ 10,000$
Financing is needed in June because the company
must maintain a minimum cash balance of $10,000.
Financing is needed in June because the company
must maintain a minimum cash balance of $10,000.

59. © The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Slide
3-59
End of Chapter 13End of Chapter 13
Chester, ol’Chester, ol’
buddy, I wonder ifbuddy, I wonder if
you could helpyou could help
me with a littleme with a little
cash flowcash flow
problem I’mproblem I’m
having?having?