Hey thanks guys for being here on this fifth time together.
We have been talking about cash flow statements.
What we're going to do today is I assigned you a couple cash flow statements to do correct?
Rosenow and Foxboro.
We're going to go over the answers to those but the bulk of this class is going to be
spent analyzing and talking about interpretation of cash flow statements okay.
Now a lot of accounting classes they'll teach you how to do it.
They'll teach you how to prepare the cash flow statement but then they stop.
They don't say okay what does this mean okay and I don't want to leave that part out of
it because analysis of this information is the most important part right okay.
So let's go ahead.
How did Rosenow and Foxboro go?
Rosenow first of all.
Rosenow wasn't too tough was it?
Let's take a look at that one alright and for you folks who are watching this hopefully
you are doing this stuff before every time we get together so that you can go over your
answers alright.
Okay let's take a look at this one.
This is what I gave you.
Is that correct?
I gave you comparative balance sheet and an income statement right.
Okay.
And we figured up what the cash flows from operating activities was right?
What did you get for that amount?
Okay.
Did you get fifty seven fifty to the negative?
Okay there it is down there.
We'll come back to that here in a second.
But there it is at the bottom.
Negative fifty seven fifty right there.
Go ahead and make that number yellow like I like to do okay.
And take a look at that.
Any questions on that?
We've done this a number of times haven't we?
Alright the next thing that I always say to do is to go to these items right here and
let's classify these right.
Woops I'm in the wrong spot.
How about right there.
Okay.
Alright we did not pay dividends but we did issue additional stock as shown in the above
financial statements okay.
And you can see that a common stock did increase okay.
So what type of cash flow is that?
Financing.
Is that inflow or outflow of cash?
Inflow.
And how much cash in flowed?
Seven thousand.
Okay good.
Alright we didn't sell any equipment but they did make a purchase.
What type of cash flow is that?
Investment.
Investing, is that an inflow or outflow of cash?
Outflow.
And how much cash outflowed?
Fifty four hundred.
Well let's see you just getting that as the difference right.
It say we did not sell any equipment so that has to be the amount that we purchased right.
So that is what did you say?
Fifty four hundred?
Okay.
Okay well now we use this information and we do the rest of our cash flow statement
correct?
Okay now hold of a second.
So we get net cash from investing activities of negative fifty four hundred.
Net cash by financing activities of seven thousand.
Is that correct?
And then what do those three yellow numbers add up to?
Negative forty one fifty.
Is that correct?
Yes.
Okay let me go ahead and go full screen here so you can see the whole thing okay.
Okay now you can see the whole thing a little bit better.
Alright these three numbers in yellow they need to add up to negative forty one fifty
and is that in fact our change in cash?
Did cash go down by forty one fifty?
Yes.
It did because we know our begging balance, we know our ending balance okay.
So make sure you label that appropriately okay.
Alright any questions on that?
Yes Claudia?
When we have a negative number do we still have to say provided?
You know what good for you.
I have this labeled wrong okay.
Claudia brought up a great point.
I actually made this mistake on purpose.
I just wanted to see if anybody would catch it.
I'm proud of you okay.
So provided by is if it positive like in this case right here correct?
But when it's negative we don't say provided by.
What do we say?
Used in okay.
Down here this is negative as well.
Isn't that correct?
So we say used in.
very nice.
Very, very good catch.
Very good catch Claudia.
Okay, make sense?
Any questions on this one?
No?
Okay if not lets go to Foxboro okay.
Okay Foxboro.
See if I can blow this up a little bit.
Okay.
Alright let's take a look at Foxboro okay.
Alright make that a little easier for you to see.
Here's the balance sheets for Foxboro correct and here is an income statement okay.
And then we have some additional information.
Okay let's read that additional information and we'll come back to it.
Now the company sold equipment for twenty six thousand cash which resulted in the six
thousand gains; see income statement.
Now the reason I said this is because it's shown right there but I found out if I don't
put the verbiage there people thing oh is there another six thousand dollar gain besides
the one that I see in the income statement.
Now this is the same one as this okay.
Cash dividends of thirty three thousand were declared and paid.
We purchased some new equipment for a hundred and fifty.
Foxboro loaded forty thousand to Harker Company on long term note receivable.
Foxboro sold ten thousand shares of stock at a market price of six dollars per share
and we raised additional capital by issuing long term bonds.
They want us to prepare a cash flow statement correct?
Alright so the first thing that we're going to do is prepare our operating section correct?
Did you get thirty nine thousand as your operating cash flows?
Okay take a look at that.
Now we haven't had one for a while where we had a gain okay.
Now remember somebody might say wait a minute Dave I thought equipment was a long term asset.
It is.
We don't analyze the change in equipment it's self in the operating section but any gains
are subtracted out and any losses are added back okay.
I think we talked about that last time.
So that is your operating cash flows number, thirty nine thousand okay.
Alright now what we have to do is go down to this additional information.
Is that correct?
And we need to describe what kind of cash flow it is.
Is that right?
What via if it's operating, investing or financing.
If it's an inflow or outflow and we'll go ahead and expand on that and say how much
cash in flowed or how much cash out flowed.
You with me?
Okay let's go through those.
The company sold equipment for twenty six thousand cash.
What type of activity is that?
Its and investing.
Is it an inflow or outflow of cash?
Inflow.
Inflow of how much cash?
How much cash in flowed?
Twenty six thousand.
Cash dividends of thirty thousand were declared and paid okay.
What type of cash flow?
Financing.
Inflow or outflow?
Outflow.
How much cash outflowed?
Thirty three thousand okay.
Company purchased some new equipment for a hundred and fifty thousand.
What type of activity is that?
Investing.
Inflow or outflow?
Outflow of how much cash?
A hundred and fifty thousand, okay.
Alright I'm just checking over to make sure, catch me if I make a mistake.
Foxboro loaned forty thousand dollars.
Now we're Foxboro right?
So we loaned forty thousand to Harker Company on a long term note receivable.
What type of activity is that?
Investing.
That's an investing okay because it's a long term asset for us right.
Is that an inflow or outflow of cash?
Outflow.
It's an outflow.
We're loaning money, so money is going out from us to Harder.
And how much money outflowed?
Forty thousand.
Correct?
Foxboro sold ten thousand shares of stock at a market price of six dollars per share.
What type of activity is that?
Financing.
Is it inflow or outflow?
Inflow.
How much cash in flowed?
Sixty thousand dollars.
Company raised additional capital by issuing long term bonds for ninety thousand dollars
cash.
What type of activity?
Financing.
Inflow or outflow?
Inflow of cash and how much?
Ninety thousand okay.
Can you see that back there alright?
Does that look right?
Okay so we have; look like we have three investing, three investing's and three financing's right?
Okay so let's prepare that section.
Okay that was quick.
Alright.
These are the numbers in yellow for our cash flows from investing activities.
Our cash flows from financing activities okay.
Actually we could just probably change that; instead of saying from investing activities
we should say used in okay.
Now do those three numbers; what do they add up to?
Negative eight?
Is that correct?
Is it negative eight?
Woops I hit the wrong one.
Just a second.
Okay that adds up to negative eight thousand; is that correct?
Is that in fact our change in cash?
Did cash decrease by eight thousand?
It did.
So now we can complete the rest of this right.
That information in green we had from the very begging; did we not?
Okay.
So that is a complete cash flow statement.
That's a little more difficult one then you've done isn't it?
Okay.
And of course we need to head that up don't we.
Now I can go full screen, okay.
So this over here to the right is; this is our cash flow statement in good form isn't
it?
Okay.
How many people got that right?
Anybody?
Anybody get the whole thing?
Okay it's nice when there's a self-checking mechanism isn't there.
Okay.