GENERAL rules for the Statement of Cash Flows (Indirect Method) Cash provided by op.

activities: Net Income (from Income Statement) + Depreciation, amortization, and/or depletion (From Income Statement) + Decrease in CURRENT Asset accounts other than cash (calculate the difference between this period and last period from Balance Sheet) - Increase in CURRENT Asset accounts other than cash (calculate the difference between this period and last period from Balance Sheet) + Increase in CURRENT Liabilities accounts (calculate the difference between this period and last period from Balance Sheet) - Decrease in CURRENT Liabilities accounts (calculate the difference between this period and last period from Balance Sheet) + Loss on Disposal of PPE/Fixed Assets used in normal operations (From Income St.) - Gain on Disposal of PPE/Fixed Assets used in operations (From Income Statement) = cash provided by op. activities Cash provided by investing activities: - Increase in PPE and LONG-TERM Assets if paid cash (calculate the difference between this period and last period from Balance Sheet) + Decrease in PPE and LONG-TERM Assets if received cash (calculate the difference between this period and last period from Balance Sheet) - Increase in Investments Assets if paid cash (calculate the difference between this period and last period from Balance Sheet) + Decrease in Investments Assets if received cash (calculate the difference between this period and last period from Balance Sheet) NOTE: do not account for the change in Retained Earnings in the financing section! Why? Because the change in R/E is net income minus dividends. Net Income is shown under op. activities. Dividends, if cash, is shown in the financing section. = Cash provided by investing activities Cash provided by financing activities: + Increase in LONG-TERM Liabilities if received cash (calculate the difference between this period and last period from Balance Sheet) - Decrease in LONG-TERM Liabilites if paid cash (calculate the difference between this period and last period from Balance Sheet) + Increase in Stockholders Equity -stocks - if received cash (calculate the difference between this period and last period from Balance Sheet) - Decrease in Stockholders Equity - stock - if paid cash (calculate the difference between this period and last period from Balance Sheet) - CASH Dividends Paid = Cash provided by financing activities Last Portion of SCF: Total Change in cash (the net of the 3 above) + Cash at the beginning of the period = Cash at the end of the period ( this should be the same amount as your end of period cash account in the balance sheet)

Cash Flows Category

Operating Investing Financing Positive Negative Negative Positive Positive OR Negative Positive Positive General Interpretation The company is prosperous and growing. Financing cash flow is used to take advantage of growth opportunities. The company faces serious financial problems. It is selling assets and using financing activities to meet current cash needs. The company is prosperous but may not have a lot of good growth opportunities. It is using operating cash to pay off debt and pay stockholders. The company may be facing a current cash flow problem. It is selling assets to supplement current cash flows to cover its financing needs.

Positive Positive OR Negative

Negative

Positive

Negative