Statement of Cash Flows

  1. Differentiate between cash inflows and cash outflows.
  2. What are internal sources of financing?
  3. What are external sources of financing?
  4. Why is depreciation/amortization considered a cash inflow?
  5. Identify the basic structure of the statement of cash flows.

 

  1. In the statement below, although cash increased in 2014, why is it considered a cash outflow?

 

LEARNING EXERCISES

EXERCISE 1: SOURCES OF CASH FLOWS

 

Identify, under the appropriate heading, whether the following changes are an inflow of cash or an outflow of cash. What amounts and percentages were used by internal and external sources to finance the purchase of the assets?

 

      In $
  This Last Cash Cash
  Year Year Inflows Outflows
House 134,600 130,000    
Trailer 12,000 —-    
Furniture 5,600 4,000    
Mortgage 75,000 60,000    
RRSP 23,000 20,000    
Loan made to a friend —- 5,000    
Car loan 12,000 8,000    
Visa 1,250 600    
The Bay —- 450    
Cash in the bank 3,000 2,000    
Marketable securities 12,000 10,000    
Total        

 

        In %
  This Last Cash Cash
  Year Year Inflows Outflows
House 134,600 130,000          
Trailer 12,000 —-          
Furniture 5,600 4,000          
Mortgage 75,000 60,000          
RRSP 23,000 20,000          
Loan made to a friend —- 5,000          
Car loan 12,000 8,000          
Visa 1,250 600          
The Bay —- 450          
Cash in the bank 3,000 2,000          
Marketable securities 12,000 10,000          
Total     100.0 100.0  
               

 

Note: Salary in excess of expenses is not a statement of cash flows account.

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