1

TheThe Statement of Statement of Cash FlowsCash Flows

2Sebagus apakah laporan arus kas itu ?

Apakah sebuah laporan arus kas menceritakan hal yg

belum diketahui dari neraca dan laporan rugi laba ?

Apakah sebuah laporan arus kas menceritakan hal yg

belum diketahui dari neraca dan laporan rugi laba ?

3What Good Is a Cash Flow Statement?

Ya karena ada situasi dimana laba tidak dapat memberikan

gambaran yg jelas atas kinerja perusahaan ?

Ya karena ada situasi dimana laba tidak dapat memberikan

gambaran yg jelas atas kinerja perusahaan ?

4What Good Is a Cash Flow Statement?

Begitu juga hal-hal lain yg berhubungan dengan laporan keuangan akan ada di laporan arus kas

Begitu juga hal-hal lain yg berhubungan dengan laporan keuangan akan ada di laporan arus kas

Sehingga laporan arus kas menjadi instrumen penting

dalam penilain laba

Sehingga laporan arus kas menjadi instrumen penting

dalam penilain laba

Laporan arus kas menjelaskan perubahan pada kas atau setara kas dalam periode tertentu

Laporan arus kas menjelaskan perubahan pada kas atau setara kas dalam periode tertentu

5Structure of the Cash Flow Statement

Apakah maksud setara

kas ?

Apakah maksud setara

kas ?

Investasi jangka pendek yg sangat

likuid .

Investasi jangka pendek yg sangat

likuid .

Dapat segera ditukar dengan kas ketika diperlukan dan sangat dekat dengan masa jatuh temponya sehingga kecil

resiko terjadinya perubahan nilai akibat perubahan tingkat suku bunga

Dapat segera ditukar dengan kas ketika diperlukan dan sangat dekat dengan masa jatuh temponya sehingga kecil

resiko terjadinya perubahan nilai akibat perubahan tingkat suku bunga

6

CASH INFLOWS

Cash Inflows

OperatingActivities

InvestingActivities

FinancingActivities

Structure of the Cash Flow Statement

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Aktivitas operasi—Transaksi-transaksi dan kejadian-kejadian yg akan menentukan laba bersih.

Activitas Investasi—Transactions and events that involve the purchase and sale of securities, property, plant, equipment, and other assets not generally held for resale, and serta memberi dan menagih pinjaman

Financing Activities—Transactions and events dimana kas diperoleh dan dibayarkan kembali kepada pemilik dan kreditor.

Cash Flow Patterns

8

Pola Arus Kas

Over the Life of a CompanyOver the Life of a Company

Start-up, High-Growth Company/PT baru yang sedang tumbuh pesat

FinancingFinancing

InvestingInvesting

OperatingOperating

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Cash Flow Patterns

Over the Life of a CompanyOver the Life of a Company

Steady-State Company/PT yg sedang mempertahan kan posisi

OperatingOperating

InvestingInvesting

FinancingFinancingDividends

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Cash Flow Patterns

Over the Life of a CompanyOver the Life of a Company

Cash Cow/PT yg sudah Mapan

OperatingOperating

InvestingInvesting

FinancingFinancingDividends

Share Repurchases

Loan Repayment

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Noncash Transactions

Investing and financing activities that do not affect cash.

Significant transactions should be disclosed separately.

These transactions do not affect the statement of cash flows.

12Reporting Cash Flows from Operations

• Direct Method—A method of reporting net cash flows from operations that shows cash receipts and payments for a period of time. This method is more straight forward.

• Indirect Method—A method of reporting net cash flow from operations that involves reconciling net income to a cash basis. It shows how noncash flows affect net income.

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The Direct Method

• This method reports directly the major classes of operating cash receipts and payments of an entity during a period.

• Accrual-basis revenues and expenses must be converted to equivalent cash receipts and payments.

• The amount of cash actually collected or paid is determined.

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Indirect Method

• Adjustments for receivables and other current operating assets.

• Adjustments for payables and other current liabilities.

• Adjustments for depreciation and other noncash items.

• Adjustments for gains and losses.

The indirect method makes the following adjustments:

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Operating Activities

Cash Inflow

• Cash receipt of sales

• Collection of receivables

• Interest revenue

• Dividend revenue

Cash Inflow

• Cash receipt of sales

• Collection of receivables

• Interest revenue

• Dividend revenue

Cash OutflowCash Outflow

• Inventory paymentsInventory payments

• Interest paymentsInterest payments

• WagesWages

• Utilities Utilities

• RentRent

Cash OutflowCash Outflow

• Inventory paymentsInventory payments

• Interest paymentsInterest payments

• WagesWages

• Utilities Utilities

• RentRent

16Relationship Between Net Income and Operating Cash Flow

Business dalam aktivitas operasiBusiness dalam aktivitas operasi

Laba bersihLaba bersih

Gunakan aturan akuntansi akrualGunakan aturan akuntansi akrual

Hilangkan akrual untuk mendapatkan

arus kas

Hilangkan akrual untuk mendapatkan

arus kas

Kas diterima dan dikeluarkan

Kas diterima dan dikeluarkan

Arus kas operasiArus kas operasi

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Sales and Cash Collected from Customers: Beginning accounts receivable $ 40

+ Sales 150= Cash available for collection $190– Ending accounts receivable 60= Cash Collected from Customers $130

Example of Operating Activities Section for the Direct Method

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Cost of Goods Sold and Cash Paid for Inventory:Ending inventory $ 75

+ Cost of goods sold 80= Required inventory $155– Beginning inventory 100= Cash paid for inventory this year $ 55

Example of Operating Activities Section for the Direct Method

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Wages Expense and Cash Paid for Wages:Beginning wages payable $ 7

+ Wages expense 25= Total obligation to employee $32– Ending wages payable 10= Cash paid for wages $22

Example of Operating Activities Section for the Direct Method

20Adjustments for Gains and Losses

Gains or losses do not represent the cash effect of the transaction.

Adjustment toAccount Net Income

Losses

Gains

These adjustments are made to net income These adjustments are made to net income since the sale of an investment is an investing since the sale of an investment is an investing

activity, not an operating activity.activity, not an operating activity.

These adjustments are made to net income These adjustments are made to net income since the sale of an investment is an investing since the sale of an investment is an investing

activity, not an operating activity.activity, not an operating activity.

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Adjustments for Receivables

Changes in accounts directly affect revenues recorded on an accrual basis.

Account Adjustment toAccount Change Net Income

Accounts Receivable

Accounts Receivable

Inventory

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Adjustments for Payables

Changes in liabilities mean the reverse of changes in current operating asset accounts.

Account Adjustment toAccount Change Net Income

Accounts Payable

Wages Payable

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Noncash Adjustments

• Depreciation and similar noncash items do not affect cash and are not reported on the statement of cash flows.

• Any noncash item that reduces net income should be added back to net income in the indirect method.

• Any noncash item that increases net income should be subtracted from net income in the indirect method.

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Investing Activities

Cash Inflow• Sale of plant assets

• Sale of securities, other than trading securities

• Collection of principal on loans

Cash Inflow• Sale of plant assets

• Sale of securities, other than trading securities

• Collection of principal on loans

Cash Outflow• Purchase of plant assets

• Purchase of securities, other than trading securities

• Making of loans with other entities

Cash Outflow• Purchase of plant assets

• Purchase of securities, other than trading securities

• Making of loans with other entities

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Financing Activities

Cash Inflow• Issuance of own

stock

• Borrowings

Cash Inflow• Issuance of own

stock

• Borrowings

Cash OutflowCash Outflow• Dividend paymentsDividend payments

• Repaying principal Repaying principal on borrowingon borrowing

• Treasury Stock Treasury Stock purchasepurchase

Cash OutflowCash Outflow• Dividend paymentsDividend payments

• Repaying principal Repaying principal on borrowingon borrowing

• Treasury Stock Treasury Stock purchasepurchase

26Differences between Income and Cash from Operations

Cash from NetCash from Net

Company Name Operations Income DifferenceCompany Name Operations Income Difference

General Motors $19,750 $ 4,452 $(15,298 )

Lehman Brothers (14,733 ) 1,775 16,508

Ford Motors 33,764 3,467 (30,297 )

Citigroup 2,673 13,519 10,846

SOURCE: Standard and Poor COMPUTSTAT

Year 2000 (All amounts are in

millions)

Year 2000 (All amounts are in

millions)

27General Format of aStatement of Cash Flows

Cash Provided by (Used for):

Operating Activities $XXX

Investing Activities XXX

Financing Activities XXX

Net Increase (Decrease) in Cash $XXX

Cash—Beginning of Year XXX

Cash—End of Year $XXX

28Preparing aCash Flow Statement

1. Compute how much the cash balance changed during the year.

2. Convert the income statement from an accrual-basis to a cash-basis summary of operations.

a. Eliminate expenses that do not involve the outflow of cash, such as depreciation.

b.Eliminate gains and losses associated with investing or financing activities.

c. Adjust for changes in the balances of current assets and current liabilities.

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3. Analyze the long-term assets to identify the cash flow effects of investing activities.

4. Analyze the long-term debt and stockholders’ equity account to determine the cash flow effects of any financing transactions.

5. Make sure that the total new cash flow from operating, investing, and financing activities is equal to the net increase or decrease in cash as computed in Step 1, then prepare a formal statement.

6. Prepare supplement disclosure of significant noncash transactions.

Preparing aCash Flow Statement

30Example: ComparativeBalance Sheet

Accounts PayableLong-term Notes PayableCommon StockRetained Earnings Total Liabilities and Equity

2005 2004AssetsCash and Cash EquivalentsAccounts ReceivableInventoryEquipmentAccumulated Depreciation Total AssetsLiabilities and Equity

$ 82 180 170 200 (72)$560

$100 100 250 110$560

$ 40 150 200 140 (60)$470

$ 80 50 250 90$470

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Income Statement, 2005

Sales Expenses: Cost of goods sold Selling and general expense Depreciation Interest expenseOperating incomeGain from sale of equipmentIncome before income taxesIncome tax expenseNet income

$345

$120 58 20

2 (200 )$145 5 $140 30 $110

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Cash 2004........................... $ 40

Cash 2005........................... 82

Change in Cash................... $ 42

Determine change in cash and cash equivalents:

Step 1

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Convert from an accrual-basis to a cash-basis summary of operations:

Step 2

EXAMPLE: Eliminate depreciation expense, $44, because it does not require the use of cash.

EXAMPLE: Eliminate depreciation expense, $44, because it does not require the use of cash.

Cash provided by operations 44Accumulated Depreciation

44(t-account or work sheet entry)

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Convert from an accrual-basis to a cash-basis summary of operations:

Step 2

EXAMPLE: Eliminate the $5 gain from selling equipment.

EXAMPLE: Eliminate the $5 gain from selling equipment.

Cash 33Accumulated Depreciation 32

Equipment60

Gain on Sale of Equipment5

Add back $5 to cash Add back $5 to cash provided by operations.provided by operations.

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Analyze the long-term assets to identify the ash flow effects of investing activities.

Step 3

Expenditures for Property, Plant, and Equipment: Beginning equipment $140

– Equipment sold during the year 60= 80– Ending equipment 200= Expenditures for equipment during

year $ 120

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Analyze the long-term debt and stockholders’ equity accounts to determine the cash flow effects of any financing transactions:

Step 4

Expenditures for Long-Term Debt: Beginning L-T Notes Payable balance $ 50

– Notes reacquired during the year 0= 50– Ending L-T Notes Payable balance 100= L-T Notes Payable issued during year 50

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Analyze the long-term debt and stockholders’ equity accounts to determine the cash flow effects of any financing transactions:

Step 4

Payment of Dividends: Beginning Retained Earnings balance $ 90

+ Net income 110= 200– Ending Retained Earnings balance 110= Dividends paid 90

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Steps 5 and 6

Steps 5 and 6 relate to actually preparing

the formal and supplementary

statements.

Steps 5 and 6 relate to actually preparing

the formal and supplementary

statements.

39

Cash Flows from Operating Activities: Net income $110 Adjustments: Depreciation expense 44 Gain on sale of equipment (5) Increase in accounts receivable (30) Decrease in inventory 30 Increase in accounts payable 20 Net Cash Provided by Operating Activities $169

Operating Activities Section: Indirect Method

ContinuedContinuedContinuedContinued

Cash Flows from Operating Activities: Cash Collected from Customers $414 Cash Payments for:

Inventory (155) Selling & General Expenses

(58)

Interest (2)

Income Taxes (30)

(245)

Net Cash Provided by Operating Activities $169

Operating Activities Section: Direct Method

ContinuedContinuedContinuedContinued

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The investing and financing sections are the same whether the direct or indirect approach is used.

The investing and financing sections are the same whether the direct or indirect approach is used.

Operating Activities Section: Direct Method

42Investing and Financing Activities Sections

Cash Flows from Investing Activities: Proceeds from sale of equipment $ 33

Purchase of equipment (120)

Net cash provided by investing activities (87

)Cash Flows from Financing Activities:

Issuance of long-term notes payable 50 Payment of cash dividends (90

)Net cash used for financing activities (40)

Net increase in cash 42 Cash, January 1, 2005 40

Cash, December 31, 2005 82

43Investing and Financing Activities Sections

Cash Flows from Investing Activities: Proceeds from sale of equipment $ 33

Purchase of equipment (120)

Net cash provided by investing activities (87

)Cash Flows from Financing Activities:

Issuance of long-term notes payable 50 Payment of cash dividends (90

)Net cash used for financing activities (40)

Net increase in cash 42 Cash, January 1, 2005 40

Cash, December 31, 2005 82

44

Assessing Financial Strength

Financial strength is a function of—

Financial strength is a function of—

LiquidityProfitabilityGrowth potentialRisk

45

Assessing Financial Strength

Cash flow-to-net incomeCash flow-to-net incomeCash flow-to-net incomeCash flow-to-net income

Cash from operations

Net income

o Measure of earnings quality

o Tends to be greater than 1

o Should remain fairly stable for the years for a specific company

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Assessing Financial Strength

Cash flow adequacyCash flow adequacyCash flow adequacyCash flow adequacy

Cash from operations

Net incomeo Measures relationship between investment spending

and cash generated by operationso Indicate a company’s attitude towards reinvestment

in long-lived production assetso When ratio is small it indicates that cash flows from

operations fall short of funding growth

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Assessing Financial Strength

Cash times interest earnedCash times interest earnedCash times interest earnedCash times interest earned

Cash from operations + Interest paid + Taxes paid

Interest expense

o Measures ability to service debt

o Generally, a higher ratio indicates more solvency

48Forecasted Statement of Cash Flows

Six StepsSix StepsSix StepsSix Steps

1. Compute the change in cash.2. Convert the income statement

from an accrual to cash basis.3. Analyze the long-term asset

accounts.4. Analyze the long-term debt and

stockholders’ equity.5. Prepare the forecasted

statement of cash flows.6. Disclose noncash activities.

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The EndThe End