CASH FLOW FROM OPERATING ACTIVITIES

Net Income
+ Depreciation, Amortization or Depletion
+ Non-operating Losses
- Non-operating Gains
+ any increases in Current Liabilities
+ any decreases in Current Assets
- any decreases in Current Liabilities
- any increases in Current Assets
= Cash Flow from Operating Activities
CASH FLOW FROM INVESTING ACTIVITIES:
+ sell Long-term assets for cash
- buy (construct) Long-term assets for cash
= Cash Flow from Investing Activities
CASH FLOW FROM FINANCING ACTIVITIES:
+ Stock issued for cash
+ Cash borrowed with loans and bonds
- Treasury stock repurchased for cash
- Cash used to repay loans and bonds
- Cash dividends paid
=Cash Flow from Financing Activities
Total Cash Flow (Operating, Investing, Financing)
+ Beginning Cash
= Ending Cash
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imple example of cash flow statement

During the year Shiner Corporation paid dividends of $18,000. Shiner also issued $150,000 in
bonds and purchased land, a building, and some equipment for cash.
Comparative Balance Sheet
Shiner Corporation
Assets Dec 31, 1996 Dec 31, 1995
Cash $37,000 $49,000
Accounts Receivable $26,000 $36,000
Prepaid Expenses $6,000 $0

Land $70,000 $0
Building $200,000 $0
Accumulated Depreciation $11,000 $189,000 $0
Equipment $68,000 $0
Accumulated Depreciation $10,000 $58,000 $0
Total Assets $386,000 $85,000
Liabilities and Stockholder Equity
Accounts Payable $40,000 $5,000
Bonds Payable $150,000 $0
Common Stock $60,000 $0
Retained Earnings $136,000 $20,000
Total Liabilities and Stockholder Equity
$386,000
$85,000
Income Statement
Shiner Corporation
Revenue $492,000
Operating Expenses $269,000
Depreciation $21,000
$290,000
Income before Income Taxes $202,000
Income Tax Expense $68,000
Net Income $134,000
Step 1: Change in Cash: Dec 31, 96 Balance minus Dec 31, 95 balance ($37,000$49,000)=($12,000)
Step 2: Net Cash flow from Operating Activities
Direct Method:
Cash collected from Revenues $502,000
Cash payments for Expenses $240,000
Income before Income Taxes $262,000
Cash payment of taxes $68,000
Net cash flow from Operating Activities
$194,000
Comments: The $502,000 was derived by adding the change in Accts Receivable to Revenues for
the period. The cash payments for expenses was derived by adding the increase in prepaid assets
and subtracting the change in Accts Payable.
Indirect Method:
Net Income $134,000
Adjustments to reconcile net income to net cash
Accts Receivable decrease $10,000

Prepaid Expense ($6,000)

Accts Payable Increase $35,000
Depreciation $21,000
$60,000
Net cash flow from Operating Activities $194,000
Step 3:
Investing Activities:
Land Purchase $70,000
Building Purchase $200,000
Equipment Purchase $68,000
Financing Activities :
Dividend payment to shareholders $18,000
Issuance of Bonds Payable $150,000
Statement of Cash Flows
Cash Flow from Operating Activities
Net Income $134,000
Adjustments to reconcile net income to net cash
Accts Receivable decrease $10,000
Prepaid Expense increase ($6,000)
Accts Payable Increase $35,000
Depreciation $21,000
$60,000
Net cash provided from Operating Activities $194,000
Investing Activities
Land Purchase ($70,000)
Building Purchase ($200,000)
Equipment Purchase ($68,000)
($338,000)
Financing Activities
Dividend payment to shareholders ($18,000)
Issuance of Bonds Payable $150,000 $132,000
Net Decrease in Cash ($12,000)
Cash Jan 1, 1996 $49,000
Cash Dec 31, 1996 $37,000
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