5. APRIL 12, 2007 FIRM’S FINANCIAL HEALTH DETERMINED BY CASH FLOW PROFIT TRIPLED Y/Y No-Cash Corporation Income Statement for year 1 and 2 . 30,000 10,000 INCOME 70,000 40,000 NET EXPENSE 100,000 50,000 NET SALES YEAR 2 YEAR 1 FINANCIALS
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8. APRIL 12, 2007 FIRM’S FINANCIAL HEALTH DETERMINED BY CASH FLOW No-Cash Corporation Balance Sheet at December 31, Year 2 . $35,000 $57,000 $22,000 Total Liabilities and Equity $30,000 $45,000 $15,000 Equity +$10,000 $10,000 0 Notes Payable to Banks -5,000 (3) $2,000 $7,000 Accounts Payable +35,000 $57,000 $22,000 Total Assets $25,000 $30,000 $2,000 YEAR 2 +15,000 (2) $10,000 Inventories +$20,000 (1) $10,000 Accounts Receivables 0 $2,000 Cash CHANGE YEAR 1 FINANCIALS
9. APRIL 12, 2007 FIRM’S FINANCIAL HEALTH DETERMINED BY CASH FLOW No-Cash Corporation Indirect Method of Determining Cash Flow - Year 2 Would you lend this firm $10,000? ($10,000) Cash Generated ($ 5,000) (Subtract) Decrease in A/P ($15,000) (Subtract) Increase in Inventory ($20,000) (Subtract) increase of A/R $30,000 Net Income YEAR 2 FINANCIALS
10. APRIL 12, 2007 FIRM’S FINANCIAL HEALTH DETERMINED BY CASH FLOW Reminder of the Impact Balance Sheet Items on Cash Decrease in an equity account Increase in a equity account Decrease in a liability account Increase in a liability account Increase in an asset account Decrease in an asset account OUTFLOWS INFLOWS
20. Using the Indirect Method for Cash Flows ($ 1,053) Increase (Decrease) in Cash and Marketable Securities $ 256 ($ 30) $ 5,600 ($ 1,516) ($ 1,582) $ 2,728 Sale of Common Stock Increase (Decrease) in Short Term Borrow. (Including Current Maturities of long term debt) Additions to long terms borrowing Reductions to long term borrowing Dividends Paid Net Cash provided (used) by financing activities Cash Flow from Financing Activities ($14,100) $295 ($13, 805) Additions to Property, Plant & Equip Other Investing Activities Net Cash provided (used) by investing activities Cash Flows from Investing Activities $9,394 $3,998 $208 ($610) ($10,272) $247 $6,703 $356 $10,024 Net Income Non Cash Operating Items +Depreciation +Increase in Deferred Tax Liability Cash provided (used) by current asset, liabilities. -Increase in accounts received -Increase in Inventory +Decrease in prepaid expenses +Increase in Accounts Payable +Increase in Accrued Liabilities Net Cash Flow from Operating Activities Cash Flows from Operating Activities
21. Worksheet for Preparing Statement of Cash Flows ** * $ 7,812 CHANGES IN RETAINED EARNINGS FINANCING ($ 1,582) DIVIDENDS PAID OPERATING $ 9,394 NET INCOME (OPERATING) $ 4, 084 NET CHANGE IN LONG TERM DEBT FINANCING ($ 1,516) REDUCTIONS OF LONG TERM BORROWINGS FINANCING $ 5,600 ADDITIONS TO LONG TERM BORROWINGS ** $7,812 $32,363 $40,175 RETAINED EARNINGS FINANCING $ 47 $ 910 $ 957 ADDITIONAL PAID IN FINANCING $ 209 $ 4,594 $ 4,803 COMMON STOCK STOCKHOLDERS EQUITY CATEGORY CHANGE IN 1998-1999 1999 1998