Textbook Notes (368,123)
Canada (161,661)
Business (2,391)
BU397 (49)
Chapter 22

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Department
Business
Course
BU397
Professor
Allan Foerster
Semester
Fall

Description
Statement of Cash flows Usefulness - The info may help users assess o Liquidity and solvency  Entity’s ability to generate future cash flows and its needs for cash resources o The amounts, timing, and uncertainty of future cash flows o Reasons why net income and net cash flow from operating activities differ Cash and Cash equivalents - Cash o Cash on hand o Demand deposits - Cash equivalents o Investments that are  Short term  Highly liquid  Readily convertible to known amounts of cash  Subject to an insignificant risk of change value o Made up of non-equity investments that are acquired with short maturities  Less than 3 months The cash flow statement - Provides info about o Cash receipts (cash inflows) during the year o Uses of cash (cash outflows) during the year - Inflows and outflows are reported for o Operating activities o Investing activities o Financing activities o FV for the lessor = MLP x PV annuity DUE factor using the lease term and ROR as the discount rate + residual value x PV factor (because the residual value is at the end of the useful life) Cash flow classifications - Operating Activities o Cash flows resulting from the primary revenue producing activities in the business such as  Collections from customers  Payments to suppliers  Payments to employees  Payments to CRA for tax o Cash flow provided by operating activities necessary for long term sustainability of the business  To take advantage of new investment opportunities  To pay dividends without seeking external financing - Investing Activities o The acquisition and disposal of long term assets and long term investments o Includes  Purchase/disposal of capital assets  Tangible and intangible  Cash receipts from the disposal of assets mentioned above  Cash payments to acquire equity or debt instruments  Cash receipts from the disposal of equity or debt instruments o Cash flows generated by investing activities shows if the business is investing in additional long term assets that will generate profits and increase cash flows in the future - Financing Activities o Changes in long-term debt or equity capital o Including  Issuing debt or repayment of debt  Issuing new shares or repurchase or currently outstanding shares  Cash payments by a lessee for the reduction of the outstanding obligation related to a finance lease o Provides information to assess potential for future claims to entity’s cash, extent of debt and increased interest charges - Noncash transactions o Transactions that do not involve the direct receipt or disbursement of cash in the period  Assets acquired by assuming debt or issuing shares  Exchanges of no
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