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Managerial: Accounting by Elizabeth Davis, Charles E. Davis

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13

STATEMENT OF CASH FLOWS

After studying this chapter, you should be able to meet the following learning objectives (LO).

  1. Categorize cash activities as operating, investing, or financing. (Unit 13.1)
  2. Calculate cash flows provided by operating activities using the indirect method. (Unit 13.2)
  3. Calculate cash flows provided by investing activities. (Unit 13.3)
  4. Calculate cash flows provided by financing activities. (Unit 13.3)
  5. Construct a statement of cash flows. (Unit 13.4)
  6. Analyze a statement of cash flows. (Unit 13.4)
  7. Calculate cash flows provided by operating activities using the direct method. (Appendix)

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The Pitch

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“Claire, I don't understand something,” said George Douglas, C&C Sports' CEO, in the weekly managers' meeting. “Our sales and income have been increasing dramatically. Interest in our baseball pants, jerseys, and award jackets is higher than ever. Every year we're profitable, but we keep having to borrow money. It doesn't make sense to me.”

“You're right, George,” replied Claire Elliot, vice president of finance and administration at C&C Sports. “We're profitable and we're doing a lot of business, but we have some problems with our cash flow.”

“How can that be?” Douglas asked. “Have our customers quit paying their bills?”

“No, they're still paying what they owe us,” ...

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