Statement of Cash Flows Examples

The calculations below use the current live scenario and update when a new scenario is generated.

The examples below use these values. Generate a new scenario to practice the same steps with different numbers.

Generate New Scenario

Concept Summary: Classification begins by identifying the activity that caused the cash movement.

Example A: Classify operating, investing, and financing cash flows

Example B: Identify noncash investing and financing activities

Concept Summary: The indirect method starts with net income and adjusts it until it becomes operating cash flow.

Example A: Build operating cash flow from net income

Example B: Explain working-capital adjustments

Example C: Reconcile net income to operating cash flow

Concept Summary: Investing cash flows report cash used for and received from long-term assets.

Example A: Reconstruct equipment activity

Example B: Prepare the investing section

Example C: Interpret the investing pattern

Concept Summary: Financing cash flows report cash transactions with creditors and owners.

Example A: Reconcile debt activity

Example B: Reconcile equity and dividends

Example C: Prepare and interpret the financing section

Concept Summary: Cash-flow evaluation asks whether reported earnings are converting into cash, whether assets are being maintained, and how the company is financed.

Example A: Operating cash flow quality

Example B: Free cash flow

Example C: Cash-flow pattern interpretation

Concept Summary: The direct method converts each major revenue and expense line from accrual basis to cash basis.

Example A: Convert sales revenue to cash collected

Example B: Convert cost of goods sold to cash paid to suppliers

Example C: Convert operating expenses to cash paid

Example D: Prepare the direct-method operating section and reconcile to indirect CFO

Concept Summary: A disposal of property, plant, and equipment affects operating cash flow and investing cash flow. The gain or loss is an accrual income statement amount. The sale proceeds are the cash flow.

Example A: Determine book value of equipment sold

Example B: Determine the gain or loss on sale

Example C: Classify sale proceeds and indirect-method adjustment

Concept Summary: The T-account approach explains cash flows by reconciling beginning balances, accrual activity, cash activity, and ending balances.

Example A: Accounts receivable T-account and cash collected

Example B: Inventory and Accounts Payable T-accounts

Example C: Equipment, debt, equity, and retained earnings T-accounts

Example D: Decisioning synthesis