Cash Flow Construction Indirect Method Statement of Cash Flows

Cash Flow Construction

Indirect Method Statement of Cash Flows

Charles Mulford

Invesco Chair and Professor of Accounting

Scheller College of Business

Georgia Institute of Technology

Atlanta, GA 30332

cwmulford@

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C. Mulford, Cash Flow Construction, page:

Partitioning Cash Flows

Cash flow activity can be partitioned in many ways. Consider,

the following example.

Star Therapeutics, Inc.

The income statement. . .

Year-ended March 31,

2018

2017

$ 20,359

8,480

11,879

$ 14,518

6,916

7,602

4,791

113

4,904

6,975

3,777

70

3,847

3,755

97

7,072

2,762

$ 4,310

50

3,805

1,199

$ 2,606

Amounts in (000¡¯s)

Net Sales

Cost of sales

Gross profit

Costs and expenses:

Selling, general and administrative expense

Research and development

Total costs and expenses

Operating income

Interest income

Earnings before income taxes

Income taxes

Net earnings

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C. Mulford, Cash Flow Construction, page:

Star Therapeutics, Inc. (cont'd)

The balance sheet. . .

2018

2017

1,809

1,029

2,872

4,011

145

356

$ 1,219

416

2,126

1,845

84

125

154

10,222

5,969

500

56

$ 10,778

346

56

$ 6,371

Assets

Current Assets:

Cash

Marketable securities

Accounts receivable, net

Inventories

Income taxes refundable

Prepaid expenses

Deferred income taxes

Total current assets

Property and equipment, net

Other assets, net

$

Liabilities and Shareholders¡¯ Equity

Current liabilities:

Accounts payable

Accrued expenses

Income taxes payable

Total current liabilities

Shareholders¡¯ equity:

Common stock

Retained earnings (deficit)

Treasury stock

Total shareholders¡¯ equity

$

399

424

180

$

514

283

-

1,003

797

6,791

3,052

(68)

9,775

6,832

(1,258)

5,574

$ 10,778

$ 6,371

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C. Mulford, Cash Flow Construction, page:

The One-Minute Cash Flow Statement. . .

Star Therapeutics, Inc.

Cash Flow Statement

Year Ended March 31, 2018

Beginning Cash

Net Cash Flow

Ending Cash

$ 1,219

590

$ 1,809

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