Beruflich Dokumente
Kultur Dokumente
5-1
5-2
5-3
5-4
5-5
Chapter 5
Payments
to suppliers (for inventory)
to employees (for wages)
to creditors (interest)
to government (taxes)
191
5-6
5-7
5-8
5-9
5-10 Selling fixed assets for cash and collecting a loan increase cash.
Purchasing equipment decreases cash. Purchasing fixed
assets by issuing debt does not affect cash, but it should be
shown in a schedule of noncash investing and financing
activities that is part of the statement of cash flows.
5-11 When liabilities increase, the firm has either raised cash and
promised to pay it back later or it has preserved cash rather than
paying it out to reduce growing accounts payable. So more
liabilities lead to more cash. Likewise, increases in noncash
assets require cash. Either cash is spent to get the asset or an
asset is recorded instead of receiving cash.
5-12 Noncash investing and financing activities generally could have
been accomplished identically in substance (though not in form)
192
Chapter 5
193
194
Chapter 5
195
196
200,000
(160,000)
(35,000)
(11,000)
(6,000)
Notice especially that both proceeds from the new issue and the
payment to retire long-term debt are listed. Presenting only the net
amount, 40 of proceeds, is not permitted. Also, the interest is omitted
because it is an operating activity, not a financing activity.
5-32 (5-10 min.)
FAR-EAST TRADING COMPANY
Statement of Cash Flows from Investing Activities
For the Year 20X5
Purchases of fixed assets
Proceeds from the sale of fixed assets
Investment in Repulski Company
Net cash used for investing activities
Chapter 5
$(160,000)
20,000
(60,000)
$(200,000)
197
191,000
$340,000
630,000
5-34 (5 min.)
The split between cash and credit sales is irrelevant for purposes
of this problem.
Sales
Less increase in accounts receivable
Cash received from customers
$750,000
(30,000)
$720,000
5-35 (5 min.)
Cost of goods sold
Add increase in inventory ($150,000 $100,000)
Deduct increase in accounts
payable ($45,000 $24,000)
Cash paid to suppliers
198
$500,000
50,000
(21,000)
$529,000
$195,000
180,000
$ 15,000
$ 18,000
15,000
$ 33,000
$465,000
250,000
$215,000
Chapter 5
199
200
$185,000
35,000
(5,000)
$215,000
Sales
Nondepreciation expenses [570,000 100,000]
Depreciation
Net income
Add back depreciation
Net cash provided by operating activities
$880,000
(470,000)
(100,000)
$310,000
100,000
$410,000
2.
Sales
Nondepreciation expenses [570,000 100,000]
Depreciation
Net income
Add back depreciation
Net cash provided by operating activities
$ 880,000
(470,000)
(300,000)
$ 110,000
300,000
$ 410,000
Notice that the additional depreciation did not affect net cash
provided by operating activities. The direct method clearly shows this
phenomenon:
Direct method:
Sales for cash
Operating expenses in cash
Net cash provided by operating activities
Chapter 5
$ 880,000
(470,000)
$ 410,000
201
Financing
Financing
Operating
Investing
Financing
f.
g.
h.
i.
Financing
Operating
Operating
Financing
202
(1,335.8)
(385.2)
64.6
(18.0)
1,259.6
(7.2)
$(422.0)
Chapter 5
203
204
$ 9,355
(7,499)
(140)
(167)
1,549
(1,710)
191
(134)
(1,653)
135
(160)
251
(17)
(193)
16
(88)
200
$ 112
$1,400
$(825)
(200)
(100)
( 11)
(35)
(1,171)
229
Chapter 5
(435)
110
(41)
69
(137)
176
$ 39
205
(540)
47
(493)
28
(25)
(98)
(95)
(361)
368
$ 386
$(199)
(82)
(15)
(8)
(304)
$ 82
$(125)
5
(120)
$ 100
(10)
90
$ 52
45
$ 97
Chapter 5
207
J. M. SMUCKER COMPANY
Statement of Cash Flows
For the Year Ended April 30, 2003
(In Millions)
Cash Flows from operating activities:
Cash received from customers ($1,311 $43)
Cash paid for operating expenses
($1,147 + 12 - 56 - 34)
Cash paid for other expenses ($9 $12)
Taxes paid ($59 $23)
$1,268
(1,069)
3
(36)
$ 166
208
$ 7
(34)
(53)
(27)
$ 86
Chapter 5
820
(680)
140
(315)
100
(215)
65
(30)
35
(40)
60
20
209
CSR LIMITED
Statement of Cash Flows
For the Fiscal Year 2003
(In Millions)
Cash flows from operating activities:
Receipts from customers
Payments to suppliers and employees
Dividends and interest received
Income taxes paid
Net cash from operating activities
Cash flows from investing activities
Purchase of property, plant, and equipment
Proceeds from sale of property, plant, and equipment
Other investing activities
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of shares
Repurchase of shares
Net proceeds from borrowings
Dividends paid
Interest paid
Net cash from financing activities
Net increase in cash
A$7,572.7
(6,281.3)
78.3
(197.6)
1,172.1
(315.2)
97.7
(897.6)
(1,115.1)
42.8
(6.7)
666.2
(245.1)
(111.4)
345.8
A$ 402.8
2.
3.
4.
210
Chapter 5
2,545
109
(1,954)
(140)
560
(672)
(672)
236
1,546
(262)
(1,419)
101
(11)
72
61
211
212
$ 314
45
(100)
(50)
25
(10)
5
$ 229
[1,500 1,400]
[ 850 800]
[ 850 825]
[ 200 190]
[ 40 35]
$514
$191
164
$ 17
(11)
(1)
(84)
71
(54)
355
(62)
$807
Chapter 5
17.1
93.0
16.4
30.6
30.7
2.8
(29.5)
161.1
213
Income Statement
Sales
Nondepreciation expenses ($350 $25)
Depreciation (Revised)
Net income
$380
$325
45
214
370
$ 10
$ 10
45
(17)
$ 38
Net income
254
Adjustments to reconcile net income to net
cash provided by operating activities:
Add: Depreciation
151
Deduct: Increase in accounts receivable (2,510 2,413)
(97)
Deduct: Increase in inventory
(56)
Add: Increase in accounts payable (1,599 + 56 1,653)
2
Deduct: Decrease in wages payable
(24)
Deduct: Decrease in income taxes payable (108 105)
( 3)
Net cash provided by operating activities
Chapter 5
227
215
216
$ 15
$ 40
15
5
5
2
67
82
$(125)
5
(120)
$ 100
(10)
90
52
45
$ 97
2.
$ 60
40
(35)
(44)
75
$ 96
(240)
138
$ (6)
21
$ 15
Chapter 5
217
ROSENBERG COMPANY
Statement of Cash Flows
For the Year Ended December 31, 20X4
(In Millions)
Cash flows from operating activities:
Cash collections from customers
($275 $14)
Cash payments:
To suppliers ($165 + $20 $14)
For general expenses ($51 + $1)
For taxes ($10 $1)
Cash disbursed for operating activities
Net cash provided by operating activities
Cash flows from investing activities:
Acquisition of plant assets
Proceeds from sale of plant assets
Net cash used for investing activities
Cash flows from financing activities:
Issue long-term debt
Pay cash dividends
Net cash provided by financing activities
Net decrease in cash
Cash balance, December 31, 20X3
Cash balance, December 31, 20X4
218
$261
$(171)
(52)
(9)
(232)
29
$ (98)
6
(92)
$ 50
(2)
48
(15)
20
$ 5
5-59 (continued)
2.
Reconciliation of Net Income to Net Cash
Provided by Operating Activities
Net income
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation
Increase in accounts receivable
Increase in inventory
Increase in prepaid general expenses
Increase in accounts payable for merchandise
Increase in accrued tax payable
Net cash provided by operating activities
3.
$ 9
40
(14)
(20)
( 1)
14
1
$ 29
Chapter 5
219
Cash =
Sales
Cash collections from
customers
Cost of goods sold
Purchases
Payments to suppliers
Payments for general expense
Tax expense
Payments for taxes
Net cash provided by operating
activities (a subtotal)
Expenses not requiring cash:
Depreciation
Net income (a subtotal)
Purchase of plant assets
Proceeds from sale of plant
assets
Long-term debt issued
Dividends paid
98
+ 6
+ 50
2
=
=
=
+ 50
Net changes
15
+ 65
220
=
+ 261
171
52
9
=
=
=
=
=
=
=
+ 275
(+ 275)
165
( 261)
( 165)
(+ 185)
+ 185
171
+ 10
9
51
10
(+ 1)
40
9
( 40)
29
=
(+ 98)
( 6)
2
+ 7
(+ 87)
$ 9,758
152
$ 9,910
$ (8,074)
(129)
(390)
(8,593)
$ 1,317
$ (1,986)
(3,848)
500
(5,334)
$ 3,300
170
1,906
(850)
(249)
(240)
4,037
$ 20
Chapter 5
221
5-61 (continued)
Reconciliation of Net Income to Net Cash Provided by Operating Activities
Net income
Adjustments to reconcile net income to net cash
provided by operating activities:
Add:
Depreciation and amortization
Add:
Loss on sale of fixed assets (500 576)
Deduct: Gain on extinguishment of debt (900 850)
Deduct: Increase in inventories
Add:
Decrease in accounts receivable
Add:
Increase in accounts and wages payable
Add:
Increase in interest payable
Add:
Increase in taxes payable
Net cash provided by operating activities
$ 672
615
76
(50)
(72)
19
7
15
35
$1,317
222
$ 516
$ 960
$ 297
Chapter 5
$5,917 (a)
74
5,991
5,712
$ 279
$5,975 $58
$3,971 + $117 + $10
$1,814 $288 - $1 $24 $17
$92 $44
223
2.
224
2002
$ 999.9
(253.5)
746.4
(412.6)
$ 333.8
2001
$1,132.0
(276.5)
855.5
(409.8)
$ 445.7
2000
$ 880.9
(230.9)
650.0
(403.9)
$ 246.1
A.
B.
C.
4.
5.
Chapter 5
225
5-64
(continued)
Although not required as part of the problem, we provide here the
complete statement of cash flows for reference:
MCDONALDs
CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)
Operating activities
Net income
Adjustments to reconcile to cash provided by operations
Depreciation and amortization
Changes in operating working capital items
Accounts receivable
Inventories, prepaid expenses and other current assets
Accounts payable
Taxes and other liabilities
Other
Cash provided by operations
$ 1,636.6
1,050.8
1,086.3
1.6
(38.1)
(11.2)
448.0
545.5
2,890.1
(104.7)
(62.9)
10.2
270.4
(147.6)
2,688.3
Investing activities
Property and equipment expenditures
Purchases of restaurant businesses
Sales of restaurant businesses and property
Other
Cash used for investing activities
(2,003.8)
(548.4)
369.5
(283.9)
(2,466.6)
(1,906.2)
(331.6)
375.9
(206.3)
(2,068.2)
Financing activities
Net short-term borrowings (repayments)
Long-term financing issuances
Long-term financing repayments
Treasury stock purchases
Common stock dividends
Other
Cash used for financing activities
Cash and equivalents increase (decrease)
Cash and equivalents at beginning of year
Cash and equivalents at end of year
(606.8)
1,502.6
(750.3)
(670.2)
(297.4)
310.9
(511.2)
(87.7)
418.1
$ 330.4
(248.0)
1,694.7
(919.4)
(1,068.1)
(287.7)
204.8
(623.7)
(3.6)
421.7
$ 418.1
226
Brookline has a large and growing cash balance. Both sales and
income are declining, indicating that Brookline has not
successfully developed products to replace those responsible for
its peak sales in 2000. The company is apparently managing a
declining situation, selling more fixed assets than it is building or
acquiring. In fact, rather than investing in producing assets,
Brookline seems to be putting any extra cash into passive
investments such as the equity securities of other corporations.
Of the $1,050,000 of net income, $1,500,000 ($900,000 + $600,000)
was investment revenue. $2,100,000 was a gain on the sale of
fixed assets, and these were offset by a $1,200,000 loss on the
building fire. The ongoing business was generating a deficit.
Without the two nonrecurring items and the investment revenue,
there would have been negative net income (i.e. a loss) of
$1,350,000 (= $1,050,000 $1,500,000 $2,100,000 + $1,200,000).
Even after taking account of the $600,000 of depreciation and
amortization, net cash flow from operations would have been a
negative $750,000. Only by reducing working capital by $375,000
and receiving $900,000 in dividends did Brookline get a positive
$525,000 of cash flow from operating activities.
Notice that the two largest sources of cash for Brookline are the
insurance proceeds on the fire and cash from the sale of fixed
assets. Although these items have generated a healthy increase
in cash this year, they cannot be expected to reoccur regularly.
Chapter 5
227
5-65 (continued)
2.
228
Chapter 5
229
230
5-69 (continued)
2.
Management indicated that cash provided by operations
increased from $922 million in 2003 to $1.5 billion in 2004. The two
main reasons for the increase were the increased net income and
better control of working capital. By better supply chain management
Nike reduced its accounts receivable and increased its accounts
payable, resulting in the freeing up of additional cash.
3.
Cash provided by operations exceeds net income by almost
$570 million. About half of this is caused by adding back depreciation
to the net income. The other half is primarily a result of better control of
working capital.
4.
Nike, like every company using the indirect method, adds
depreciation and amortization to net income to offset their deduction in
computing net income. Depreciation and amortization are expenses,
but they are not cash outflows. They are correctly subtracted from
revenues in computing net income, but they should not be deducted
from cash receipts in computing cash from operations. Adding both
back to net income just cancels the deductions taken when computing
net income.
5.
There were three main investing activities that used cash,
purchases of short-term investments, additions to property, plant, and
equipment, and acquisition of a subsidiary (Converse).
6.
Nike used cash for three main financing activities, including just
over $50 million net reductions in long-term debt ($153.8 million 206.6
million = -$52.8 million), repurchases of stock exceeding new issues by
more than $160 million ($419.8 million - $253.6 million = $166.2 million),
and cash dividends paid of nearly $180 million.
Chapter 5
231