Cash Flow Statement Part 2

With that brief explanation about the sources and uses of funds, let's take a look at Company's Cash Flow Statement.

As you can see, the Cash Flow Statement is divided into OPERATING ACTIVITIES, Sources and Uses, and FINANCING ACTIVITIES. The final calculation is the NET INCREASE or DECREASE IN CASH AND MARKETABLE SECURITIES. Let's see how we get there.

Operating activities: Sources

Net Income Before Preffered Dividens (if available) and the US$ 445.770 million  (US$ 245. 870 + 199.900 million) Depreciation charge are taken directly from the 2014 Income Statement/ Balance sheet.

The current liabilities from the Balance Sheet are listed individually
(Increase In Accounts Payable, Increase In Accrued Wages and Taxes, Increase In Other Current Liabilities) with their net change from 2013 to 2014. Total Sources From Operations ($120.095 million) is the sum of these sources.

Operating activities: Uses

Next, the net change in each asset account except Cash and Marketable Securities is listed: (Increase In Accounts Receivable, Increase In Inventories, Increase In Prepaid Expenses, Increase In Other Current Assets, Increase In Gross Fixed Assets. Gross Fixed Assets is used instead of Net Fixed Assets because we have already adjusted for Depreciation and we do not want to double count. Total Uses From Operations is the sum of these changes.

Financial activities: 

Finally, we summarize the financing activities by listing each net change from 2013 to 2014 for the potential sources of capital: (Increase In Notes Payable, Increase In Long-Term Bonds, Increase In Preferred Stock, Increase Of Common Stock. Net Funds From Financing is the sum of the financing activities

Total funds from operations and financing.

Total Funds From Operations And Financing is calculated by subtracting the uses from the sources and adding to that number the Net Funds From Financing. In our Company example, that calculation is:

Total operating sources                                                          $92.091 million
- Total operating uses                                                             $25.273 million
+ Net financing sources                                                         (- $55.267) million
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 Total funds from operations and financing                            $ 12.151 million

 

Finally, we subtract the total value of the Common and Preferred Dividends (from the Income Statement) to arrive at the net Increase or Decrease in Cash and Marketable Securities (if available).