[snowmist69]

Need a little help I have to do a cash flows statement then a supporting schedule of noncash investing transactions and financing transactions. I know how to do the indirect method. I have the comparative balance sheet but there is no comparative income statement. Do I just forget the year before on the balance sheet?



How do you compute and assess cash flow yield and free cash flow?:eek:

[Just Looking]

You don't need a comparative income statement. You will look at the current income statement and the change in balance sheet items to do the cash flow statement. The nice thing about cash flow statements is you know your starting and ending cash, so you will know if your statement is correct or not if your calculations come out right.

You can Google both of those for an explanation. Why don't you do that and see if you understand and can explain it? We can correct you if there's some confusion.

PS - Hi, again. Hope your studies are going well. :)

[snowmist69]

Thank you, you just jogged my memory. I will do this and post and we can ckecked it over, have most done. So glad your back and I'm actually doing good I have a teacher now who goes over what we do and show us how that's why I knew how to do indirect method just had a brain freeze as you will see tom. I have come a little ways around.

[Just Looking]

Glad to hear it. I just started a new job so I won't be around as much or on as late as I used to be, but I will keep an eye out for your questions. I know that you are working hard to understand everything.

[snowmist69]

Here is what I did my numbers seem to match up. I remember you saying the beginng and ending cash should come out the same if I did it right.
Wu Company
Statement Of Cash Flows
For the Year Ended December 31, 2011

Cash flows from operating activities

Net income $11,000
Adjustments to reconcile net income to net
cash flows from operating activities
Depreciation 46,800
Gain on sale -7,000

Changes in current assets and current liabilities
Decrease in accounts recievable 34,800
Decrease in inventory 100,000
Decrease in prepaid rent 1,000
Decrease in accounts payable -57,000
Decrease in taxes payable -3,000

115,600
Net Cash Flows flows from operating activities $126,600

Cash Flows from investing activities
Sell of funiture & fixtures -25,800
Net cash flows from investing activities -25,800

Net cash flows from financing activities
Repayment of notes payable -20,000
Issue notes payable 40,000
Declared cash dividends -6,000
114,800

Cash at beginning of year 50,000
Cash at end of year 164,800


Schedule of Noncash Investing and Financing Transactions

Converted Bonds Payable $100,000



2)less inventory, sold a little more,less taxes,less bonds payable
3)126,600/ (11,000) =11.5 cash flow yield
126,600-6,000-39,600=13,800=94,800 free cash flow
They are able to generate cash good I think when the cash yield number is above 8. Then that means the company is doing really well
for questions 2 and 3
2) what are the primary reasons for Wu company's large increase in cash from 2010 to 2011, despite low net income?

3) Compute and assess cash flow yield and free cash flow for 2011. Compare and contrast what these two performance measures tell you about Wu company's cash-generating ability.
The third question is proably off some not sure how to answer the discussion part.

[Just Looking]

The one line that I'm questioning is the "sale of furniture and fixtures" as that would increase cash not decrease it. Are you sure you have the wording correct? If furniture and fixtures were purchased it would make more sense.

2) Also the new note payable.

3) Check your Free Cash Flow formula. It should be Operating Cash Flow (which you have fine) minus Capital Expenditures. Free Cash Flow is a measure of the money available to security holders of the company - including debt holders, equity holders (such as common stockholders or preferred stockholders), etc. Investors are interested in this number as a comparison to the yield of other investment choices.

Cash flow shows the company's ability to maintain a growing concern and shows the trend of corporate growth.


ETA: I can see that you have come a long ways. I'm glad you have a good teacher now.

[snowmist69]

Ok I will check an that was suppose to be purchased funiture and fixtures. I think I just type the wrong saying for notes payable. The borrowed 40,000 on a new note. I will check the cash flow formula again just guess at that one. Thank you for your help.

[Just Looking]

If they purchased new furniture and fixtures, your numbers are fine. You just need to change your wording.

My note about the $40,000 new note is an additional comment to your #2 question as to why the cash increased so much. The decrease in inventory is the main reason, but the new note is also significant.

The cash flow yield is okay. Look at your free cash flow formula.