business and finance question

timer Asked: Aug 7th, 2014
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Question Description

How are changes in AR shown on the indirect SCF?  What about on a direct SCF?

Tutor Answer

School: UIUC

The Statement of Cash Flow (formerly Statement of Changes in Financial Position) shows the changes in cash and cash equivalents   arising from the operating, financing and investing activities of the enterprise. This information is useful for:

1.  understanding effects of operating, financing and investing activities on cash;

2.  assessing liquidity and solvency; and

3.  assessing the firm=s ability to generate cash from internal sources

.SCF:  Direct and indirect methods

There are two methods of presentation of the SCF:  the direct and indirect methods. The only difference is in the presentation of cash from operating activities.

Direct method (preferred by IFRS)

  Cash inflows from operations  $

  Cash outflows related to operations  $

  Net cash from operations  $

Indirect method

  Net income  $

  +/- diff. between accrual and cash acctg  $

  Net cash from operations 

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