COMM 211 Lecture Notes - Lecture 10: Cash Flow Statement, Share Repurchase, Direct Method (Education)
2 Dec 2017
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Document Summary
In the long-term, a business needs to generate cash flows from operations to be successful. Cash inflows: collections from customers, interest and dividends received. Cash outflows: payments to suppliers, payments to employees, payment of interest, payment of income tax. Cash flows related to long-term assets & investments. Cash outflows: cash paid to acquire property, plant and equipment, cash paid to acquire long-term investments, cash paid to acquire short-term investments. Cash inflows: proceeds from disposal of property plant and equipment, proceeds from disposal of long-term investments, proceeds from disposal of short-term investments. Cash inflows: issue long-term debt, issue bonds, issue shares. Cash outflows: repay long term debt, share repurchase, cash dividend. In practice, companies use the indirect method. Similarities: investing and financing activities are reported the same, reconciles opening and closing cash balance. Differences: operating activities are reported differently depending on which method we use. Gain (loss) on sale of property, plant and equipment.
