Direct and Indirect Cash Flows Christine Grae XACC/291 Principles of Accounting II March 29‚ 2015 Susan Schulz When companies utilize the accrual method of accounting‚ they will prepare a cash flow statement in order to understand the flow of cash. We call this method the cash flow statement and it can be prepared in two different methods which would be indirect and direct. The methods are different but they both will be conducted with the same results for the accounting period. The direct
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Assignment Week 1 Individual Writing Assignment Week 1 Question 2.2 – Accounting and Cash Flows: Why is it that the revenue and cost figures shown on a standard income statement may not be representative of the actual cash inflows and outflows that occurred during a period? Financial Statements are prepared according to accrual rule of ‚ according to which cost and revenue are recorded as they occur and not when they are actually received or paid. This is why cash flows during the year
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Cash is the life blood of a business and it can’t operate without it. Survival of a business depends upon its ability to meet liabilities when they fall and thus requires cash. When considering the overall cash flow of the yacht business we can see that it is suffering from cash flow problems ever since the business started. Although the monthly deficit has been decreasing every month due to the increased sales‚ the overall balance carried forward is gradually going up. It would be advisable
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The cash outlay for the truck is $17‚100 and that for the pulley system is $22‚430. The firm’s cost of capital is 14%. After-tax cash flows‚ including depreciation‚ are as follows: Year Truck Pulley 1 $5‚100 $7‚500 2 $5‚100 $7‚500 3 $5‚100 $7‚500 4 $5‚100 $7‚500 5 $5‚100 $7‚500 Calculate the IRR‚ the NPV‚ and the MIRR for each project‚ and indicate the correct accept-reject decision for each. Year Truck Pulley 0 -$17‚200 -$22‚430 1 $5‚100 $7‚500 2 $5‚100 $7‚500 3 $5‚100
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concept of cash-flow for the business finance Definition: Cash flow is the movement of money into or out of a business‚ an account or an investment. Normally‚ when the cash inflow is greater than the cash outflow it is a sign of a good financial situation because cash flow is essential for the survival of a business or even to any individual financial condition. If the company can meet its obligations and keep a healthy inflow of cash it has a healthy situation and the management of the company can
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Questions I. 1. Major Sources Major Uses 2. Is CFO>0? CFO compared to Net Income 3. CFO>Capex? 4. CFO>Capex + Dividends 5. Excess Cash 6. Source of cash to pay Capex and/or Dividends 7. Were working capital accounts other than cash and cash equivalents primary sources of cash or users of cash? 8.What other major items affected cash flows? 1991 1. Major sources of cash are cash received from customers and proceeds from the issuance
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Chapter 12 Problems 1. Cash flow (LO2) Assume a corporation has earnings before depreciation and taxes of $100‚000‚ depreciation of $50‚000‚ and that it has a 30 percent tax bracket. Compute its cash flow using the format below. Earnings before depreciation and taxes _____ Depreciation _____ Earnings before taxes _____ Taxes @ 30% _____ Earnings after taxes _____ Depreciation _____
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he should buy Pinkerton for the asking price of $100 million. Second‚ regardless of your answer to #1‚ assuming that Wathen does buy Pinkerton‚ should he finance the purchase with Financing Alternative #1 (debt and equity financing from an investment firm) or Alternative #2 (all debt financing from a bank). The financing alternatives are discussed on page 4 of the case. You should do the discounted cash flow valuation of the deal using Adjusted Present Value. The question is “What is Pinkerton
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José A Valdés 3 de octubre de 2013 Sem. De Contabilidad Prof. Alejandro Méndez Case 11-1 Polluter Corp Facts of Case: Polluter Corp is an SEC registrant and manufacturer household cleaning products. In the course of operations‚ Polluter Corp emits emission pollutants; The Company receives emissions allowances‚ (EAs‚) from the government for 2010 to 2030. Polluter Corp will upgrade their production facilities in 2014 in order to reduce their pollutants. Emissions Allowance
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Cash Flow Statements - Indirect method – Reconciliation for Cash from Operations –from Accrual profit to Cash generated. Accrual profit recorded items below that did not involve Cash Action to derive Cash Explanations and reasons for adjustments necessary to derive Cash from Operations [Profit making activities] 1 Depreciation buildings Add back Non cash expense that reduced profit 2 Proceeds from sale of Asset deduct Non cash gain or profit that increased profit 3 Carrying amount of Asset sold
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