Page 107 - Finance for Non-Financial Managers

Siciliano06.qxd 2/8/2003 7:05 AM Page 88
Finance for Non-Financial Managers
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Operations
Net Income
Adjustments $19,200
Add back depreciation—no cash paid for this 7,500
Increase in accounts receivable—more sold than collected (125,600)
Decrease in prepaid expenses—amortized, but no cash paid 1,500
Decrease in inventory—cash raised by lowering stock on
10,600
hand
Increase in accounts payable—cash borrowed from
creditors 28,500 (77,500)
Cash flow provided by (used for) Operations (58,300)
Operations
Capital expenditures—cash invested in new equipment (45,000)
Short-term investments sold—net proceeds from sale 24,000
Cash flow provided by (used for) Investments (21,000)
(58,300)
Financing
Increase in bank debt—new short-term borrowing from bank 7,500
Net reduction in long-term debt—payments made on long-
(1,000)
term loans
Dividends paid to stockholders—cash paid out to owners (5,000)
Cash flow provided by (used for) Financing 1,500
Net Cash Flow (Drain) (77,800)
Add balance of cash—beginning period 42,500
Balance of cash—end of period ($35,300)

Figure 6-2. Statement of cash flow, April 2003 (indirect method)

ny, this is the conversion of net income into net cash flow. You’ll
see how that happens as this chapter unfolds.

Net Income
The first line is net income because, as we’ve noted, a prime
objective of this report is to show the differences between net
income and net cash flow. This number should be the same as
the net income amount shown on the income statement. Next,
we list as adjustments all the operating items that had an
impact on cash that were not included in the income statement.