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Understanding the Statement of Cash Flow

This document outlines the objectives and reading assignment for a class session on the statement of cash flows (SCF). The session will: 1) Explain the purpose and three sections of the SCF, 2) Distinguish between direct and indirect SCFs, 3) Cover how to derive an indirect SCF from the income statement and balance sheet. Students are asked preparation questions about direct vs indirect SCFs, why net income differs from cash flow, and how specific line items in the SCF are treated.

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Veli Ngwenya
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63 views1 page

Understanding the Statement of Cash Flow

This document outlines the objectives and reading assignment for a class session on the statement of cash flows (SCF). The session will: 1) Explain the purpose and three sections of the SCF, 2) Distinguish between direct and indirect SCFs, 3) Cover how to derive an indirect SCF from the income statement and balance sheet. Students are asked preparation questions about direct vs indirect SCFs, why net income differs from cash flow, and how specific line items in the SCF are treated.

Uploaded by

Veli Ngwenya
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

15.

514 SUMMER 2003

SESSION 9
THE STATEMENT OF CASH FLOW

Objectives
1. Understand the purpose of the SCF.
2. Distinguish between the three sections of the SCF.
3. Understand the differences between the direct and the indirect SCF.
4. Understand how to derive the indirect SCF from the Income Statement and the
Balance Sheet.

Reading Assignment
Pratt: Chapter 14
Intel: p. 22
CP: Understanding the Statement of Cash Flow

Class Preparation Questions


1. Explain the differences between the direct and the indirect SCF.
2. Why is a companys Net Income different from its net cash increase for the year?
3. In the Operating Activities section of the indirect SCF, why is depreciation expense
added back into the cash flow?
4. In the Operating Activities section of the indirect SCF, why do you subtract an
increase in an asset account such as Accounts Receivable?
5. Looking at Intels SCF, did Inventories increase or decrease in 2001? By how much?
What about Intels Accounts Payable?

Optional Problems
P14-2, E14-7, E14-8, E14-9, E14-10

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