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© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Slide 13-1
STATEMENT OF CASH FLOWS
Chapter
13
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Slide 13-2
Provides information about the cash receipts and cash payments of a business entity
during the accounting period.
Provides information about the cash receipts and cash payments of a business entity
during the accounting period.
Helps investors with questions about the company’s:
Ability to generate positive cash flows. Ability to meet its obligations and to pay
dividends. Need for external financing. Investing and financing transactions for the
period.
Helps investors with questions about the company’s:
Ability to generate positive cash flows. Ability to meet its obligations and to pay
dividends. Need for external financing. Investing and financing transactions for the
period.
Purpose of the Statement of Cash Flows
Purpose of the Statement of Cash Flows
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Slide 13-3
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Slide 13-4
The Statement of Cash Flows must include the following three sections:
Cash Flows from Operating Activities Cash Flows from Investing Activities Cash Flows from Financing Activities
The Statement of Cash Flows must include the following three sections:
Cash Flows from Operating Activities Cash Flows from Investing Activities Cash Flows from Financing Activities
Classification of Cash FlowsClassification of Cash Flows
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Slide 13-5
Outflows to: Suppliers of merchandise
and services. Employees. Lenders for interest. Governments for taxes.
Outflows to: Suppliers of merchandise
and services. Employees. Lenders for interest. Governments for taxes.
Inflows from: Sales to customers. Interest and dividends
received.
Inflows from: Sales to customers. Interest and dividends
received. Cash Flows from
Operating Activities
Cash Flows from
Operating Activities
+
_
Operating Activities Operating Activities
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Slide 13-6
Cash Flows from
Investing Activities
Cash Flows from
Investing Activities
+
_
Inflows from: Selling investments and plant
assets. Collecting of principal on loans.
Inflows from: Selling investments and plant
assets. Collecting of principal on loans.
Outflows to: Payments to acquire
investments and plant assets. Purchase debt or equity
investments. Make loans.
Outflows to: Payments to acquire
investments and plant assets. Purchase debt or equity
investments. Make loans.
Investing Activities Investing Activities
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Slide 13-7
+
_
Inflows from: Short-term and long-term
borrowing. Owners (for example, from
issuing stock).
Inflows from: Short-term and long-term
borrowing. Owners (for example, from
issuing stock).
Outflows to: Repayments of borrowed
funds. Owners for dividends. Purchase treasury stock.
Outflows to: Repayments of borrowed
funds. Owners for dividends. Purchase treasury stock.
Financing Activities Financing Activities
Cash Flows from
Financing Activities
Cash Flows from
Financing Activities
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Slide 13-8
Cash Equivalents
CashCashCurrency
Short-term, highly liquid investments. Readily convertible into cash. So near maturity that market value is unaffected by
interest rate changes.
Short-term, highly liquid investments. Readily convertible into cash. So near maturity that market value is unaffected by
interest rate changes.
Cash and Cash EquivalentsCash and Cash Equivalents
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Slide 13-9
The operating cash flows section
can be prepared using either the direct method or
the indirect method.
The operating cash flows section
can be prepared using either the direct method or
the indirect method.
Let’s look at the Direct
Method for preparing the Statement of Cash Flows.
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Slide 13-10
Accrual basis revenue includes sales that did not result in cash inflows.
Can be computed as:
Cash Received from Customers
Cash Received from Customers
Decrease in receivables
Decrease in receivables
Increase in receivablesIncrease in receivables
+
–
=
=
Net SalesNet Sales
Direct MethodCash Received from Customers
Direct MethodCash Received from Customers
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Slide 13-11
+
–
=
=
The A/R balance was $80,000 on 12/31/02 and $110,000 on 12/31/03. If accrual sales revenue
for 2003 was $900,000, what was cash basis revenue?
The A/R balance was $80,000 on 12/31/02 and $110,000 on 12/31/03. If accrual sales revenue
for 2003 was $900,000, what was cash basis revenue?
Decrease in receivables
Decrease in receivables
Increase in receivablesIncrease in receivables
Net Sales
$900,000
Net Sales
$900,000
Direct MethodCash Received from Customers
Direct MethodCash Received from Customers
Cash Received from Customers
Cash Received from Customers
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Slide 13-12
Cash Received from Customers = $870,000Cash Received from
Customers = $870,000
Decrease in receivables
Decrease in receivables
$30,000 Increase in receivables
$30,000 Increase in receivables–
=
Net Sales
$900,000
Net Sales
$900,000
The A/R balance was $80,000 on 12/31/02 and $110,000 on 12/31/03. If accrual sales revenue
for 2003 was $900,000, what was cash basis revenue?
The A/R balance was $80,000 on 12/31/02 and $110,000 on 12/31/03. If accrual sales revenue
for 2003 was $900,000, what was cash basis revenue?
Direct MethodCash Received from Customers
Direct MethodCash Received from Customers
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Slide 13-13
Now that we understand the
process, let’s look at some simplified
formulas for computing direct
method cash flows.
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Slide 13-14
Direct MethodInterest and Dividends Received
Direct MethodInterest and Dividends Received
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Slide 13-15
Step 1
Step 2
Direct MethodCash Paid for Merchandise
Direct MethodCash Paid for Merchandise
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Slide 13-16
How much did Lug Lite pay for inventory in 2003?
a. $900,000b. $923,000c. $947,000d. $877,000
Inventory, 1/1/03 130,000$ A/P, 1/1/03 23,000$ Inventory, 12/31/03 165,000$ A/P, 12/31/03 35,000$ COGS, 12/31/03 900,000$
Direct MethodCash Paid for Merchandise
Direct MethodCash Paid for Merchandise
Purchases for 2003 were $935,000.
Purchases = $900,000 + $35,000
Cash Paid for Merchandise in 2003 was $923,000.
Cash Paid = $935,000 - $12,000
Purchases for 2003 were $935,000.
Purchases = $900,000 + $35,000
Cash Paid for Merchandise in 2003 was $923,000.
Cash Paid = $935,000 - $12,000
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Slide 13-17
After deducting depreciation and other noncash expenses, the cash paid for expenses
is affected by
(1) whether the expense was prepaid, and
(2) whether the expense was accrued.
After deducting depreciation and other noncash expenses, the cash paid for expenses
is affected by
(1) whether the expense was prepaid, and
(2) whether the expense was accrued.
Cash Paid for Expenses
= Expenses
+ Increase in prepaid expenses - Decrease in prepaid expenses
+ Decrease in accrued liabilities - Increase in accrued liabilities
{ {
Direct MethodCash Payments for Expenses
Direct MethodCash Payments for Expenses
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Slide 13-18
Now, let’s prepare a direct
method Statement of
Cash Flows for Grate Big Company.
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Slide 13-19
Grate Big CompanyComparative Balance Sheets - Assets
December 31, 2002 2003
Cash 60,000$ 70,370$ Accounts Receivable, net 27,000 35,000 Inventory 230,000 200,000 Trading Securities - 25,000 Equipment, net 500,000 425,000 Investment in Tiny Co. 100,000 130,000
Total Assets 917,000$ 885,370$
Direct Method - ExampleDirect Method - Example
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Slide 13-20
Grate Big CompanyComparative Balance Sheets - Liabilities and Equity
December 31, 2002 2003
Accounts Payable 15,000$ 12,000$ Salaries Payable 7,000 5,000 Interest Payable 11,950 7,350 Income Tax Payable 20,000 17,000 Notes Payable, Bob's Bank 70,000 60,000 Bonds Payable 250,000 150,000 Premium on Bonds Payable 5,000 4,000
Common Stock 450,000 500,000 Retained Earnings 88,050 130,020
Total Liabilities and Equity 917,000$ 885,370$
Direct Method - ExampleDirect Method - Example
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Slide 13-21
Grate Big CompanyIncome Statement Amounts
For the Year Ending December 31, 2003
Sales Revenues 800,000$ Cost of Goods Sold 560,000 Depreciation Expense 5,000 Interest Expense 28,050 Income Tax Expense 27,980 Salary Expense 80,000 Other Expenses 71,000 Amortization of Bond Premium 1,000 Gain on Sale of Equipment 3,000 Extraordinary Loss 30,000 Equity in Investee Income 40,000
Net Income 41,970$
Direct Method - ExampleDirect Method - Example
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Slide 13-22
Direct Method - ExampleDirect Method - Example
Additional Information Trading Securities were purchased during 2003
at a cost of $25,000. Equipment with a book value of $40,000 was
sold during the year for $43,000. Equipment with a book value of $30,000 was
destroyed during a freak flood in 2003. There was no insurance.
Grate Big holds a 25% investment in Tiny Co. and accounts for it using the Equity Method.
Additional Information Trading Securities were purchased during 2003
at a cost of $25,000. Equipment with a book value of $40,000 was
sold during the year for $43,000. Equipment with a book value of $30,000 was
destroyed during a freak flood in 2003. There was no insurance.
Grate Big holds a 25% investment in Tiny Co. and accounts for it using the Equity Method.
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Slide 13-23
Direct Method - ExampleDirect Method - Example
Additional Information Grate Big’s tax rate is 40%. The Notes Payable to Bob’s Bank carry a 12%
rate. The payments are due on the first day of each month.
The Bonds Payable carry a 9% rate. Interest is payable semiannually on July 1 & Jan. 1.
Grate Big sold stock during 2001 for $50,000. Grate Big received $10,000 dividends from Tiny
Co.
Additional Information Grate Big’s tax rate is 40%. The Notes Payable to Bob’s Bank carry a 12%
rate. The payments are due on the first day of each month.
The Bonds Payable carry a 9% rate. Interest is payable semiannually on July 1 & Jan. 1.
Grate Big sold stock during 2001 for $50,000. Grate Big received $10,000 dividends from Tiny
Co.
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Slide 13-24
Salary Expense 80,000$ 2000Add: Decrease in Salary Payable 2,000
Cash Paid to Employees 82,000$
Salary Expense 80,000$ 2000Add: Decrease in Salary Payable 2,000
Cash Paid to Employees 82,000$
Sales Revenues 800,000$
Less: Increase in A/R (8,000)
Cash Received from Customers 792,000$
Sales Revenues 800,000$
Less: Increase in A/R (8,000)
Cash Received from Customers 792,000$
Direct Method - ExampleDirect Method - Example
Cash Received from Customers
Cash Paid to Employees
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Slide 13-25
Interest Expense 28,050$ 2000Add: Decrease in Interest Payable 4,600
Cash Paid for Interest 32,650$
Interest Expense 28,050$ 2000Add: Decrease in Interest Payable 4,600
Cash Paid for Interest 32,650$
Cost of Goods Sold 560,000$
Add : Decrease in A/P 3,000 Less: Decrease in Inventory (30,000)
Cash Paid for Inventory 533,000$
Cost of Goods Sold 560,000$
Add : Decrease in A/P 3,000 Less: Decrease in Inventory (30,000)
Cash Paid for Inventory 533,000$
Direct Method - ExampleDirect Method - Example
Cash Paid for Inventory
Cash Paid for Interest
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Slide 13-26
Income Tax Expense 27,980$ 2000Add: Decrease in Taxes Payable 3,000
Cash Paid for Taxes 30,980$
Income Tax Expense 27,980$ 2000Add: Decrease in Taxes Payable 3,000
Cash Paid for Taxes 30,980$
Direct Method - ExampleDirect Method - Example
Cash Paid for Taxes
Other Operating Cash Flows
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Slide 13-27
Direct Method - ExampleDirect Method - Example
Cash Flows From Operating Activities
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Slide 13-28
Grate Big CompanyStatement of Cash Flows
For the Period Ending December 31, 2003
I. Operating Cash Flows 27,370$
II. Investing Cash Flows
Proceeds from sale of Equipment 43,000
III. Financing Cash Flows
Proceeds from sale of Stock 50,000$ Principal paid on Bonds (100,000) Principal paid on Notes (10,000) (60,000)
Net Cash Flows for the Period 10,370$
Add: Beginning Cash Balance 60,000
Ending Cash Balance 70,370$
Equipment with a book value of $40,000 was sold for $43,000.
Equipment with a book value of $40,000 was sold for $43,000.
Notes Payable decreased from $70,000 to $60,000 during 2003.
Notes Payable decreased from $70,000 to $60,000 during 2003.
Bonds Payable decreased from $250,000 to $150,000 during 2003.
Bonds Payable decreased from $250,000 to $150,000 during 2003.
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Slide 13-29
Grate Big CompanyStatement of Cash Flows
For the Period Ending December 31, 2003
I. Operating Cash Flows 27,370$
II. Investing Cash Flows
Proceeds from sale of Equipment 43,000
III. Financing Cash Flows
Proceeds from sale of Stock 50,000$ Principal paid on Bonds (100,000) Principal paid on Notes (10,000) (60,000)
Net Cash Flows for the Period 10,370$
Add: Beginning Cash Balance 60,000
Ending Cash Balance 70,370$
Notice that the Ending Cash Balance per the
Statement of Cash Flows agrees with the 12/31/03
Cash balance on the Balance Sheet.
Notice that the Ending Cash Balance per the
Statement of Cash Flows agrees with the 12/31/03
Cash balance on the Balance Sheet.
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Slide 13-30
Let’s look at the Indirect Method that is used by over 97% of all
companies.
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Slide 13-31
Net Income
Net Income
Cash Flows from Operating
Activities
Cash Flows from Operating
Activities
Indirect MethodIndirect Method
Changes in current assets and current liabilities as shown on the following table.
Changes in current assets and current liabilities as shown on the following table.
+ Losses and - Gains
+ Losses and - Gains
+ Noncash expenses such as depreciation and
amortization.
+ Noncash expenses such as depreciation and
amortization.
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Slide 13-32
Use this table when adjusting Net Income to Operating Cash Flows.
Indirect MethodIndirect Method
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Slide 13-33
Let’s prepare a complete
Statement of Cash Flows
using the Indirect Method.
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Slide 13-34
Joe’s Place has prepared the Balance Sheet as of March 31, 2003, and March 31, 2002. The Income Statement for the year ended
3/31/03 has also been prepared. Joe needs help preparing the Statement of
Cash Flows.
Joe’s Place has prepared the Balance Sheet as of March 31, 2003, and March 31, 2002. The Income Statement for the year ended
3/31/03 has also been prepared. Joe needs help preparing the Statement of
Cash Flows.
Joe’s Place
Indirect Method - ExampleIndirect Method - Example
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Slide 13-35
Joe's PlaceIncome Statement
For the Year Ending 3/31/03
Revenues 727,000$ Operating Expenses (748,000) Depreciation Expense (6,000) Gain on Sale of Land 8,000 Net Loss (19,000)$
Joe's PlaceIncome Statement
For the Year Ending 3/31/03
Revenues 727,000$ Operating Expenses (748,000) Depreciation Expense (6,000) Gain on Sale of Land 8,000 Net Loss (19,000)$
The $8,000 gain was the result of selling land
costing $32,000 for $40,000 during the period.
The $8,000 gain was the result of selling land
costing $32,000 for $40,000 during the period.
Indirect Method - ExampleIndirect Method - Example
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Slide 13-36
Indirect Method - ExampleIndirect Method - Example
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Slide 13-37
Joe’s Place issued $50,000 of no par common stock to
settle the $50,000 note payable.
Joe’s Place issued $50,000 of no par common stock to
settle the $50,000 note payable.
Indirect Method - ExampleIndirect Method - Example
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Slide 13-38
Indirect Method - ExampleIndirect Method - Example
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Slide 13-39
With the indirect method, always start with the net income or net
loss for the period.
With the indirect method, always start with the net income or net
loss for the period.
Indirect Method - ExampleIndirect Method - Example
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Slide 13-40
Indirect Method - ExampleIndirect Method - Example
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Slide 13-41
Accounts receivable decreased.
3/31/03 3/31/02
$23,000 - $40,000 = $(17,000)
Accounts receivable decreased.
3/31/03 3/31/02
$23,000 - $40,000 = $(17,000)
Indirect Method - ExampleIndirect Method - Example
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Slide 13-42
Accounts payable increased.
3/31/03 3/31/02
$38,000 - $27,000 = $11,000
Accounts payable increased.
3/31/03 3/31/02
$38,000 - $27,000 = $11,000
Indirect Method - ExampleIndirect Method - Example
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Slide 13-43
Inventory increased.
3/31/03 3/31/02
$350,000 - $300,000 = $50,000
Inventory increased.
3/31/03 3/31/02
$350,000 - $300,000 = $50,000
Indirect Method - ExampleIndirect Method - Example
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Slide 13-44
Salaries payable decreased.
3/31/03 3/31/02
$ 9,000 - $14,000 = $(5,000)
Salaries payable decreased.
3/31/03 3/31/02
$ 9,000 - $14,000 = $(5,000)
Indirect Method - ExampleIndirect Method - Example
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Slide 13-45
Add back non-cash expenses. Add back non-cash expenses.
Indirect Method - ExampleIndirect Method - Example
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Slide 13-46
Subtract gains. Subtract gains.
Indirect Method - ExampleIndirect Method - Example
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Slide 13-47
The operating cash flows amount comes
from the schedule just prepared.
The operating cash flows amount comes
from the schedule just prepared.
Indirect Method - ExampleIndirect Method - Example
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Slide 13-48
Land originally costing $32,000 was sold for $40,000.
Land originally costing $32,000 was sold for $40,000.
Indirect Method - ExampleIndirect Method - Example
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Slide 13-49
Dividends of $20,000 were paid to owners during the year.
Dividends of $20,000 were paid to owners during the year.
Indirect Method - ExampleIndirect Method - Example
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Slide 13-50
Compute the net change in cash for the period.
Compute the net change in cash for the period.
Indirect Method - ExampleIndirect Method - Example
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Slide 13-51
Complete the Statement of Cash Flows by reconciling beginning
cash to ending cash.
Complete the Statement of Cash Flows by reconciling beginning
cash to ending cash.
Indirect Method - ExampleIndirect Method - Example
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Slide 13-52
Note that the ending cash amount ties back to the Joe’s
Place Balance Sheet at 3/31/03.
Note that the ending cash amount ties back to the Joe’s
Place Balance Sheet at 3/31/03.
Indirect Method - ExampleIndirect Method - Example
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Slide 13-53
In addition, on the face of the statement or in a
supplemental schedule, disclose the
$50,000 noncash financing activity.
In addition, on the face of the statement or in a
supplemental schedule, disclose the
$50,000 noncash financing activity.
Indirect Method - ExampleIndirect Method - Example
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Slide 13-54
In addition, cash interest payments and
cash tax payments must also be disclosed
separately.
In addition, cash interest payments and
cash tax payments must also be disclosed
separately.
Indirect Method - ExampleIndirect Method - Example
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Slide 13-55
Cash Budgets are used by management to plan and forecast future cash flows.
Cash Budgets are used by management to plan and forecast future cash flows.
Force m anagem ent to coordinate activities.
Provide m anagers w ith advance notice of available resources.
Provide targets useful in evaluating perform ance.
Provide advance w arnings of potential cash shortages.
A C ash Budget can be used to:
Managing Cash FlowsManaging Cash Flows
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Slide 13-56
Increase collection of accounts receivables.
Keep inventory low.Delay payment of liabilities.Plan timing of major expenditures. Invest idle cash.
Increase collection of accounts receivables.
Keep inventory low.Delay payment of liabilities.Plan timing of major expenditures. Invest idle cash.
Managing Cash FlowsManaging Cash Flows
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Slide 13-57 Cash Budgeting
Cash BudgetMay June July August
Beginning cash balance 27,500$ 15,000$ -$ -$ Add: Cash receipts 3,500 Total available cash 31,000$
Less: Cash disbursements 16,000 Excess (deficiency) of available cash over cash disbursements 15,000$ Financing neededFinancing repayments - Ending cash balance 15,000$
Cash BudgetMay June July August
Beginning cash balance 27,500$ 15,000$ -$ -$ Add: Cash receipts 3,500 Total available cash 31,000$
Less: Cash disbursements 16,000 Excess (deficiency) of available cash over cash disbursements 15,000$ Financing neededFinancing repayments - Ending cash balance 15,000$
The ending cash balance of one month becomes the beginning cash balance of the next month.
The ending cash balance of one month becomes the beginning cash balance of the next month.
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Slide 13-58
Cash BudgetingCash Budgeting
Cash BudgetMay June July August
Beginning cash balance 27,500$ 15,000$ 10,000$ 10,000$ Add: Cash receipts 3,500 2,000 9,000 14,000 Total available cash 31,000$ 17,000$ 19,000$ 24,000$
Less: Cash disbursements 16,000 18,000 6,000 8,000 Excess (deficiency) of available cash over cash disbursements 15,000$ (1,000)$ 13,000$ 16,000$ Financing needed 11,000 - - Financing repayments - - 3,000 6,000 Ending cash balance 15,000$ 10,000$ 10,000$ 10,000$
Cash BudgetMay June July August
Beginning cash balance 27,500$ 15,000$ 10,000$ 10,000$ Add: Cash receipts 3,500 2,000 9,000 14,000 Total available cash 31,000$ 17,000$ 19,000$ 24,000$
Less: Cash disbursements 16,000 18,000 6,000 8,000 Excess (deficiency) of available cash over cash disbursements 15,000$ (1,000)$ 13,000$ 16,000$ Financing needed 11,000 - - Financing repayments - - 3,000 6,000 Ending cash balance 15,000$ 10,000$ 10,000$ 10,000$
Financing is needed in June because the company must maintain a minimum cash balance of $10,000.
Financing is needed in June because the company must maintain a minimum cash balance of $10,000.
© The McGraw-Hill Companies, Inc., 2002McGraw-Hill/Irwin
Slide 13-59
End of Chapter 13End of Chapter 13
Chester, ol’ Chester, ol’ buddy, I wonder if buddy, I wonder if
you could help you could help me with a little me with a little
cash flow cash flow problem I’m problem I’m
having?having?