Cash Flow Statement - Ford Motor Company
Nancijo C. Emerson
OMM 622 Financial Decision-Making (MFJ1448A)
Professor Martin Cain
December 22, 2014
Cash Flow Statement - Ford Motor Company
What Does Cash Flow Mean?
A revenue or expense stream that changes a cash account over a specific period. Cash inflows usually arise from one of three activities— operating activities, investing activities, and financial. Cash activities outflows result from expenses or investments that a company makes during a specific period of time. This is an accounting statement that is generally called the Statement of Cash Flow and shows the amount of cash that a company has generated and used by a specific period. By calculating non-cash charges (such as depreciation) to the net income after taxes. The cash flow might be attributed to special projects and even to the business. So generally speaking, Cash Flow is comprised of net profit. “There are three types of financial activities detailed in a cash flow statement, which include operating activities, investing activities, and financial activities. A cash flow statement can take two forms: direct format and indirect format” (Cain. 2014). Cash Flow
The generating of cash and how it is used during the period of time allows for cash to be disbursed in areas that will help the company succeed or to move it around to decrease areas that will affect the company’s net income. With this cash flow statement investors is able to see the effects on the company’s financial position and if they are able to meet future obligations when necessary. “The bottom line of financing activities shows the net cash used to finance the business” (Cain. 2014). Operating Activities
"In each period the firm realizes cash flows from operations, and the difference between cash flows and operating earnings reconcile with the balance sheet accruals" (Feltham, Ohlson. 1995:691). In normal daily operating activities companies generate a cash flow that comes from producing and delivering goods or services. Inflow can be composed and made up of many transactions: cash receipts for reimbursements of operating transactions. It can also be cash sales from sales of goods and services including receipts from collection of accounts receivable. It is also outflow of cash payments to suppliers of goods and services. These flow of transactions of operating activities it allows for the conversion of all items reported from the accrual base to cash. It is these fluctuations that are carry out by allowing the use of adjustments in the balances of all present assets as well as the present liability accounts. Investing Activities
In the ability to be able to purchase or to sale long term assets companies can increase their assets based on returns of investments. Thus this process becomes beneficial for the company. In doing so this allows for future growth in revenues. "A cash inflow on a cash flow statement is positive while cash outflow is negative" (Cain. 2014). If a negative amount of cash flows from investing activities shows that the company the company can grow from any future earnings. Investing in resources that are not financially beneficial to the company can result in pulling cash from other investing areas. Although a company may carry a loss for a period of time does not mean this investment is considered a loss. Over time, this investment will either increase profit for the company or lead the company into a sale of this investment. Financing Activities
"When this cash is invested and results in a positive cash flow from operations, the owners will typically pay down debt and return equity to the owners” (Statement of cash flows, 2012:3). Lastly listed is the financing activities and it is this activities that transactions will affect long term liabilities and stockholders’ equity accounts. It will also show...
References: Cain, M. (2014). Week Lecture. Week 4 - Weekly lecture: Elements of a statement of cash flow.
Please join StudyMode to read the full document