Statement of Cash Flow - Simple Example
for the period 12/31/2005 to 12/31/2006 | | Cash flow from operations | $4,000 | | Cash flow from investing | $(1,000) | | Cash flow from financing | $(2,000) | | Net increase (decrease) in cash | $1,000 | In financial accounting, a cash flow statement is a financial statement that shows a companys incoming and outgoing money (sources and uses of cash) during a time period (often monthly or quarterly). The statement shows how changes in balance sheet and income accounts affected cash and cash equivalents, and breaks the analysis down according to operating, investing, and financing activities. As an analytical tool the statement of cash flows is useful in determining the short-term viability of a company, particularly its ability to pay bills. International Accounting Standard 7, is the International Accounting Standard that deals with cash flow statements. The field of accounting that serves external decision makers, such as stockholders, suppliers, banks and government agencies See also: Management accounting field of accounting concerned with external users of a companys financial information. ...
Historical financial statement Financial statements (or financial reports) are formal records of a business financial activities. ...
For other uses, see Money (disambiguation). ...
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Cash-Basis Cash-basis accounting is a method of bookkeeping that records financial events based on cash flows and cash position. ...
Cash and cash equivalents are the most liquid asset found within the asset portion of a companys balance sheet. ...
International Financial Reporting Standards (IFRS) are a set of accounting standards. ...
People and groups interested in cash flow statements include
- accounting personnel, who need to know whether the organization will be able to cover payroll and other immediate expenses
- potential lenders or creditors, who want a clear picture of a company's ability to repay
- potential investors, who need to judge whether the company is financially sound
- potential employees or contractors, who need to know whether the company will be able to afford compensation
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A creditor is a party (e. ...
An investor is any party that makes an investment. ...
Operating activities
Operating activities include the production, sales and delivery of the company's product as well as collecting payment from its customers. This could include purchasing raw materials, building inventory, advertising and shipping the product. Sales are the activities involved in providing products or services in return for money or other compensation. ...
Childbirth in a hospital. ...
Items which are added back to the net income figure (which is found on the Income Statement) to arrive at cash flows from operations generally include:
- Depreciation (loss of tangible asset value over time)
- Deferred tax
- Amortization (loss of intangible asset value over time)
- Any gains or losses associated with an asset sale (unrealized gains/losses are also added back from the income statement)
Declining-balance depreciation of a $50,000 asset with $6,500 salvage value over 20 years. ...
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For other uses of Amortization, see the Amortization disambiguation page. ...
Investing activities Investing activities focus on the purchase of the long-term assets a company needs in order to make and sell its products, and the selling of any long-term assets that are no longer needed by the company. Long-term assets are those assets usually in service over one year such as buildings, equipment, etc. ...
Items under Investing Activities include:
Capital expenditures (CAPEX) are expenditures used by a company to acquire or upgrade physical assets such as equipment, property, industrial buildings. ...
Investment is a term with several closely related meanings in finance and economics. ...
Financing activities Financing activities include the inflow of cash from investors such as banks and shareholders, as well as the outflow of cash to shareholders as dividends as the company generates income. Other activities which impact the long-term liabilities and equity of the company are also listed in the financing activities section of the cash flow statement. An investor is any party that makes an investment. ...
For other uses, see Bank (disambiguation). ...
A shareholder or stockholder is an individual or company (including a corporation) that legally owns one or more shares of stock in a joint stock company. ...
It has been suggested that ex-dividend date be merged into this article or section. ...
Items under the Financing activities section include:
A dividend is the distribution of profits to a companys shareholders. ...
This article does not cite any references or sources. ...
This article does not cite any references or sources. ...
Preparation methods
Direct Method The direct method for creating a cash flow statement includes major classes of gross cash receipts and payments. This method starts with revenues and expenses, while also including Current Assets as well as Current Liabilities. The cash flow for this example is +$40.00: | Transaction | In (Debit) | Out (Credit) | | Incoming Loan | +$50.00 | | | Sales (which were paid for in cash) | +$30.00 | | | Materials | | -$10.00 | | Labor | | -$10.00 | | Purchased Capital | | -$10.00 | | Loan Repayment | | -$5.00 | | Taxes | | -$5.00 | | Total cash flow..............................+$40.00 |
Indirect Method The indirect method uses net income as a starting point, then makes adjustments for all transactions for non-cash items.
Citigroup Incorporated cash flow example:[1][2][3] Citigroup Inc. ...
Citigroup Cash Flow Statement
(all numbers in thousands) | | Period ending | 12/31/2006 | 12/31/2005 | 12/31/2004 | | Net income | 21,538,000 | 24,589,000 | 17,046,000 | | Operating activities, cash flows provided by or used in: | | Depreciation and amortization | 2,790,000 | 2,592,000 | 2,747,000 | | Adjustments to net income | 4,617,000 | 621,000 | 2,910,000 | | Decrease (increase) in accounts receivable | 12,503,000 | 17,236,000 | -- | | Increase (decrease) in liabilities (A/P, taxes payable) | 131,622,000 | 19,822,000 | 37,856,000 | | Decrease (increase) in inventories | -- | -- | -- | | Increase (decrease) in other operating activities | (173,057,000) | (33,061,000) | (62,963,000) | | Net cash flow from operating activities | 13,000 | 31,799,000 | (2,404,000) | | Investing activities, cash flows provided by or used in: | | Capital expenditures | (4,035,000) | (3,724,000) | (3,011,000) | | Investments | (201,777,000) | (71,710,000) | (75,649,000) | | Other cash flows from investing activities | 1,606,000 | 17,009,000 | (571,000) | | Net cash flows from investing activities | (204,206,000) | (58,425,000) | (79,231,000) | | Financing activities, cash flows provided by or used in: | | Dividends paid | (9,826,000) | (9,188,000) | (8,375,000) | | Sale (repurchase) of stock | (5,327,000) | (12,090,000) | 133,000 | | Increase (decrease) in debt | 101,122,000 | 26,651,000 | 21,204,000 | | Other cash flows from financing activities | 120,461,000 | 27,910,000 | 70,349,000 | | Net cash flows from financing activities | 206,430,000 | 33,283,000 | 83,311,000 | | Effect of exchange rate changes | 645,000 | (1,840,000) | 731,000 | | Net increase (decrease) in cash and cash equivalents | $2,882,000 | $4,817,000 | $2,407,000 |
See also Historical financial statement Financial statements (or financial reports) are formal records of a business financial activities. ...
In corporate finance, free cash flow (FCF) is a measure of a firms financial performance. ...
This article does not cite any references or sources. ...
References - ^ Yahoo finance report on Citigroup
- ^ Citigroup finance report
- ^ Bodie, Z., Kane, A., and Marcus, A. J. Essentials of Investments, McGraw Hill Irwin, 2004, p.455. ISBN 0 07 251077 3
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