Working with Financial Statements 1.1 THE STATEMENT OF CASH FLOWS

1. Nahhal-ALAbdelhamidFatenDr.
AbuMandeelAhmedAmani
(EBUS3312)Financecorp.ofFundamentals
2017Dec.2,
ProjectThe
Working with Financial Statements

2. 1.1 THE STATEMENT OF CASH FLOWS
MAKI, Inc.
2006 statement of Cash Flows
Cash, beginning of year 1,500
Operating activities
Net income 11,748
Add:
Depreciation 10,000
Increase in accounts payable 3,000
Decrease short-term investment 6,500
Increase accruals 1,000
(Deduct):
Increase in accounts receivable (6,000)
Increase in inventory (20,000)
Net cash from operating activities 6,248
Investment activities
Fixed assets acquisitions (23,000)
Net cash from investment activities (23,000)
Financing activities
Increase in notes payable 5,000
Increase in long-term debt 17,400
Dividends paid (6,148)
Net cash from financing activities 16,252
Net change in cash (500)
Cash, ending of year 1,000

3. Sources and Uses of Cash
 Activities that bring cash to the firm are called sources of cash.
 Activities that involve spending cash are called uses of cash.
 An increase (decrease) in Equity and Liabilities is a source (use)
of cash.
 An increase (decrease) in Assets is a use (source) of cash.
From MAKI's balance sheet, sources of cash can be summarized as
follows:
Sources of cash
Increase in accounts payable 3,000
Decrease short-term investment 6,500
Increase in accruals 1,000
Increase in long-term debt 17,400
Increase in notes payable 5,000
Total sources of cash $32,900
Add: Net income 11,748
Depreciation 10,000
Total $54,648
From MAKI's balance sheet, uses of cash can be
summarized as follows:
Uses of cash
Increase in accounts receivable 6,000
Increase in inventory 20,000
Increase in net fixed assets 23,000
Dividends paid 6,148
Total uses of cash $55,148

4. The net addition to cash is the difference between total sources of cash
and total uses of cash:
Total sources - Total uses = Net addition to cash
54,648 - 55,148 = -500
We can verify that
Cash in 2006 - Cash in 2005 = Net addition to cash
1,000 - 1,500 = -500
MAKI Company has at the beginning of the year $1,500 in cash,
and at the end of the year it has only $1,000. This means that
MAKI Company lose $500.