Download Cash flows from operating activities

Unit 5
The purpose of Unit 5 is to define the
four basic financial statements and
discuss the information presented on
each.

Income Statement

Retained Earnings Statement

Balance Sheet

Statement of Cash Flow
Trends
in operating expenses
Current ratios
Statement of Cash Flows
◦Operating Activities
◦Investing Activities
◦Financing Activities
Statement
of Owners Equity
◦Dividends
◦Shares of Stock


Study the income statement. Concentrate on
the operating expenses. Please write in your
own words a paragraph – about 50 words –
explaining the trends in operating expenses.
Explain what you think “restructuring and
asset impairment charges are.”
Look at page 33 and page 50 for the Income
Statement and Page 36 for the explanation of
the Operating expenses
http://www.accountingformanagement.com/o
perating_ratio.htm
This website is a great reference, it has links to
most of the ratios you will ever use in
accounting, and explains their significance.


Study the balance sheets for 2009 and 2010.
Please discuss the current ratios for both
years, writing a paragraph of at least 50
words, explaining what elements of the
current ratios are responsible for the
changes.
Look at page 51 for the Balance Sheet.

It is a measure of general liquidity and is most
widely used to make the analysis for short term
financial position or liquidity of a firm. It is
calculated by dividing the total of the current
assets by total of the current liabilities.
Current Ratio = Current Assets/Current Liabilities
Use the link I gave you earlier for additional
information.


Study the statements of cash flows. Please
discuss the three activities detailed in the
statement of cash flows and describe the
information and where the preparer of a
statement of cash flows can find the
information. Your discussion should be one
or more paragraphs totaling at least 50
words.
See page 52 of the Form 10K

The statement of cash flows reports a firm’s
major cash inflows and outflows for a period.
It provides useful information about a
company’s ability to:
1. Generate cash from operations
2. Maintain and expand its operating capacity
3. Meet its financial obligations
4. Pay dividends

The statement of cash flows reports cash
flows from three types of activities:
1. Cash flows from operating activities are
cash flows from transactions that affect net
income.
2. Cash flows from investing activities are
cash flows from transactions that affect
investments in the noncurrent assets of the
company.
3. Cash flows from financing activities are
cash flows from transactions that affect the
equity and debt of the company.


The indirect method of reporting cash flows
from operating activities uses the logic that a
change in any balance sheet account
(including Cash) can be analyzed in terms of
changes in other balance sheet accounts.
Any change in the Cash account can be
determined by analyzing changes in liability,
stockholders’ equity, and noncash asset
accounts.


Cash inflows from investing activities normally
arise from selling fixed assets, investments,
and intangible assets. Cash outflows from
investing activities normally include payments
to acquire fixed assets, investments, and
intangible assets.
Cash inflows from financing activities normally
arise from issuing long-term debt or equity
securities. Cash outflows from financing
activities normally include paying cash
dividends, repaying long-term debt, and
acquiring treasury stock.

Study the statement of owner’s equity. Several
factors are responsible for the change in the
owner’s equity in the two years being
compared. Intel has only one class of stock
outstanding. Did the number of shares of that
stock increase or decrease during the year
2010? Did the company pay a cash dividend
during the year? If so, how much per share?
Where did you find that information? Please
discuss those elements, writing a paragraph of
at least 50 words, explaining where you can
find the details of these answers.



See page 53 of the Form 10K
When the only change to stockholders’
equity is due to net income or net loss and
dividends, a retained earnings statement is
sufficient.
When a corporation also has changes in
stock and paid-in capital accounts, a
statement of stockholders’ equity is normally
prepared.