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Essay / Research Paper Abstract
A 4 page paper discussing the direct and indirect methods of producing the cash statement. Motorola Corporation uses the indirect method of arriving at its statement of cash flows, as does most large companies. The purpose here is to use the information from Motorola’s 2003 Form 10-k, its annual report to the Securities and Exchange Commission (SEC) to convert its cash flow statement in the indirect form to one produced by the direct method. Bibliography lists 4 sources.
Page Count:
4 pages (~225 words per page)
File: CC6_KSacctCashFlDir.rtf
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Unformatted sample text from the term paper:
Motorola Corporation uses the indirect method of arriving at its statement of cash flows, as does most large companies. The purpose here is to use the information
from Motorolas 2003 Form 10-k, its annual report to the Securities and Exchange Commission (SEC) to convert its cash flow statement in the indirect form to one produced by the
direct method. The Direct Method The Financial Accounting Standards Board (FASB) classifies as cash received from operating activities as the transactions that result
in net income of course, plus the interest and dividends that the organization receives through investing activities. The direct method "lists cash receipts from specific operating activities and cash
payments for each major operating activity" (The Statement of Cash Flows, 2002). In converting Motorolas cash flow statement prepared by the indirect method
to one resulting from the direct method, it is necessary to include total receipts; total payments made; cash flows resulting from investing activities; and cash flows resulting from financing activities.
One instructor notes that the process "involves summarizing each and every cash transaction of the company, a tedious process if done manually, but not too difficult via computers" (Pierce,
2003). What is needed is * "All cash collected from customers, either through cash sales or through collections of accounts receivables is the basic amount of cash inflow from
operations. * "All cash paid to suppliers, employees, utilities, etc. and cash paid for interest expense is summarized and is the basic amount of cash outflows from operations" (Pierce, 2003).
The process of evaluating the sources of all cash received and the destinations of all cash paid out and then classifying them as
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