Financial Management 101: Introduction to Business Finance-Cash Flow Details

Cash Flow Details

Pdf Summary

The deconstructed sample cash flow statement in this document explains the different sections and components of a cash flow statement using the indirect method. The cash flow from operating activities section focuses on the distributor's operating activities and their connection to net income, current assets, and current liabilities. It also explains how adjustments are made to reconcile net income with net cash provided by operations, including depreciation and amortization.<br /><br />The document also highlights the significance of inventory and prepaid expenses as both cash outflows and inflows. It explains that an increase in inventory indicates money spent on purchasing inventory, while a decrease in inventory adds to net income because cash has come into the dealership. Prepaid expenses are considered cash outflows.<br /><br />Additionally, the document provides information on other assets, trade accounts payable, accrued expenses, customer refunds and deposits, floor plan notes, and their impact on cash flows. It explains how changes in these accounts can result in increases or decreases in cash.<br /><br />Furthermore, the document explores cash flows from investing activities, which involve long-term asset accounts such as investments, land, buildings, equipment, furniture, fixtures, and vehicles. It details proceeds from the sales of property and equipment, rental fleet equipment purchases, and capital expenditures and how they affect cash flows.<br /><br />Lastly, the document discusses cash flows from financing activities, which include repayments of debt, borrowings, injections of capital, payment of dividends, and distributions to stockholders. It explains the impact of net borrowings, repayments, and proceeds from long-term debt on cash flows.<br /><br />Overall, this deconstructed sample cash flow statement provides a comprehensive understanding of the different components and their relationship to cash flows in a business.

Keywords

cash flow statement

operating activities

net income

current assets

current liabilities

adjustments

inventory

prepaid expenses

cash flows

financing activities