Question

Sun Edison’s December 31.2014 cash flow statement showed an increase in total cash of 370.2. Analyze...

Sun Edison’s December 31.2014 cash flow statement showed an increase in total cash of 370.2. Analyze this increase. Are you comfortable with the way the company is generating cash. Explain What is meant by the financing section of the cash flow statement? what is the major difference between GAAP and IFRS in recognition of dividends received and paid?

Homework Answers

Answer #1

Cash flow statement showed an increase in cash of 370.2 simply means that the company has surplus cash of 370.2 during the year. It is good that the company is having more liquidity so that it can fulfill its future cash needs. It is not always comfortable just because the company have positive cash flow. It might be through selling of assets or raising fund through debt. Cash flow have 3 sections, Cash flow from operating activities, cash flow from investing activities and cash flow from financing activities. Cash flow from operating activities represents the cash flow from its normal business activities. If this portion is positive, we can say that its comfortable for the company. Investing and financing activities are not related to company’s day-to-day activities. Since it is not recurring nature, we can’t say that’s its favorable for the company.

Cash flow from financing activities:

It is the part of cash flow which shows the inflow and outflow of cash resulting from Financing and capital related activities like Financing and repayment of debt, Issuance and repurchase of stock, dividend payment etc.

IFRS and GAAP has different rules for the recognizing Dividend received in cash flow statement. US GAAP recognizes the dividend received as operating activities, but IFSR recognize the dividend based on the nature of Investment. If the company invests the fund in the normal course of business, dividend received will be classified as ‘Cash flow from operating activities’, if the shares were in the nature of investment, the dividend from it will be ‘Cash flow from Investing activities’

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
When preparing the Statement of Cash Flow using the indirect method for the current year, which...
When preparing the Statement of Cash Flow using the indirect method for the current year, which of the following statements would describe the proper presentation of a increase in the Common Stock account of $150,000 and an increase in the Paid-In Capital in Excess Par Common Stock of $25,000 for which cash of $175,000 was received for the issuance of additional common stock. Add the $175,000 as Cash received from the issuance of common stock in the Cash flow from...
What is the difference between ASPE and IFRS for the SCF? Multiple Choice Dividends paid must...
What is the difference between ASPE and IFRS for the SCF? Multiple Choice Dividends paid must be classified as a financing activity. Interest received and paid, and dividends received must be classified in operating activities. There is no choice of alternate classification All of these are differences between ASPE and IFRS for the SCF. Information regarding cash flow for interest, and cash paid for income tax, is accomplished through a disclosure note.
Using the information from the cash flow statement, perform a Discounted Cash Flow valuation of your...
Using the information from the cash flow statement, perform a Discounted Cash Flow valuation of your organisation. Attempt to value the shares of your company at the beginning of the period. Assume cost of capital of 5 %. (Show these calculations in Excel) Item 07/16 Operating Cash Flow ($millions) Receipts from Customers 2,944.56 Payments to Suppliers and Employees -2,745.75 Dividends Received 0.00 Interest Received 0.00 Interest Paid -16.50 Tax Paid -28.04 Other Operating Cashflows 8.18 Net Operating Cashflows 162.46 Investing...
CASH FLOW CATEGORIES Augustus Corporation reports the following items in its statement of cash flows. Indicate...
CASH FLOW CATEGORIES Augustus Corporation reports the following items in its statement of cash flows. Indicate whether each item is considered to be an operating, investing, or financing activity. Operating Investing Financing Cash paid for salaries and wages Cash paid to purchase property, plant, and equipment Cash received from issuing stock to owners Cash paid for income taxes Cash paid to purchase investments in securities Dividends paid to owners F Interest paid on liabilities O Cash received from sale of...
You can determine a company’s cash situation by analyzing its cash flow statement. The cash flow...
You can determine a company’s cash situation by analyzing its cash flow statement. The cash flow statement also helps determine whether the company (1) is generating enough cash from its operations to make new investments and pay dividends or (2) will need to generate cash by issuing new debt or selling its assets. A firm has $20 million in revenues. Does that mean it has generated a cash flow of $20 million? Yes No The statement of cash flows reports...
Your company, showed long-term debt of 1.7$ million, and the December 31,2006 balance sheet showed long...
Your company, showed long-term debt of 1.7$ million, and the December 31,2006 balance sheet showed long term debt of 1.9$ million. The 2006 income statement showed an interest expense of 650,000$. What is the firm's cash flow to creditors in 2006? The december 31,2005 balance sheet showed 180,000$ in the common account and 3.7$ million in the additional paid-in surplus account. The december 31,2006 balance sheet showed 195,000$ in the common account and 3.95$ million in addtional paid in surplus...
True or False 1. The approach to preparing the cash flow statement relies on the following...
True or False 1. The approach to preparing the cash flow statement relies on the following rearrangement of the balance sheet equation: Change in cash = Change in (Liabilities + Stockholders' Equity + Noncash Assets). 2. Major investing and financing activities that do not involve cash do not have to be reported as part of the statement of cash flows. 3. In the decline phase, the company continues to enjoy positive operating cash flows but stops spending cash on investing...
1. Which of the following is correct for the Cash Flow Statement(CFS) A .An increase in...
1. Which of the following is correct for the Cash Flow Statement(CFS) A .An increase in Accounts Receivable is a source of cash and should be in the CFS Investing Activities B. A payment of long term notes payable is a use of cash and should be in the CFS Financing Activities C. Deduct non cash expenditures from Net Income in the Operating Activities of the CFS D. A paid cash dividend is a use of cash and should be...
This is a 2-part question. Part 1) Indicate which section of the statement of cash flows...
This is a 2-part question. Part 1) Indicate which section of the statement of cash flows should contain each of the following items, and whether each item would result in an inflow or outflow of cash. The sections are Operating, Investing, and Financing. (a) Amortization of a patent (b) Increase in accounts payable (c) Paid cash dividends to common stockholders (d) Purchased equipment with cash (e) Increase in inventory Part 2) Please explain how to calculate free cash flow and...
The Natural Company's cash balance at December 31, 2015, was $150,000. The following information was reported...
The Natural Company's cash balance at December 31, 2015, was $150,000. The following information was reported on the company statement of cash flows for 2015, fill in the table below to identify where each item belongs on the statement cash flow and if it is added or subtracted, then calculate the operating activities for the statement of cash flow. Identify the Section of the Statement of Cash Flow (Operating, Investing, Financing) Add or Subtract? Net Income $360,000 Depreciation and Amortization...