One Response to “The statement of cash flows is one of the four primary financial statements?”

1. Sandy on February 17th, 2011 4:36 pm
   

   Cash Flow Feedback: 1. Describe the content and layout of a statement of cash flows, including its three sections
   i. Cash Provided From or Used By Operating Activities
   This section of the cash flow statement reports the company’s net income and then converts it from the accrual basis to the cash basis by using the changes in the balances of current asset and current liability accounts. In addition to using the changes in current assets and current liabilities, depreciation and the gains/losses on the sale of long-term assets are removed so that the income statement net income is converted from the accrual basis to cash.

   ii. Cash Provided From or Used By Investing Activities
   This section of the cash flow statement reports changes in the balances of long-term asset accounts. In short, investing activities involve the purchase and/or sale of long-term investments and property, plant, and equipment.

   iii. Cash Provided From or Used By Financing Activities
   This section of the cash flow statement reports changes in balances of the long-term liability and stockholders’ equity accounts. In short, financing activities involve the issuance and/or the repurchase of a company’s own bonds or stock. Dividend payments are also reported in this section.

   2. List at least three transactions classified as investing activities in a statement of cash flows
   Acquisition of long-term investments
   Accuisition of property, plant & equipment
   Giving of loans

   3. List at least three transactions classified as financing activities in a statement of cash flows
   Capital leases
   Issue of stock
   Mortgage loans

   4. List at least three transactions classified as significant noncash financing and investing activities in the statement of cash flows
   Exchange of company stock for company bonds
   Acquisition of investments by issuing stock
   Acquisition of property, plant & equipment by issuing notes payable.

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