Ghapter 23/Accounting in Action: CM2

You were looking foruard to going to CM2today since it was your last working
day as an intern. Tomorrow the group is planning to take you to lunch to
celebrate the end of your internship. You figured today would be easy- just
wrapping up loose ends.
It was not to be. You walked in and found people with expectant faces,
holding sheets of paper, and you could tell that another “issue” had arisen.
Conner and Martin started right off: they saw no reason at all for a statement of
cash flows. They felt that CM2’s cash flows were nobody’s business but the
bank’s. Lopez and Knepp clearly were trying to explain that investors like to see
where the cash flow was coming from and how the cash was being used.
So once again, you were on the spot. By now, Conner and Martin have
learned to put their questions in writing so they were ready with a paper on which
they had written: 1. What is the point of the statement of cash flows? 2. Why are there three categories of cash flow information? 3. What can the reader learn from the “Cash flow from investino”
section? 4. What can the reader learn from the “Cash flow from financino”
section? 5. What is the differcnce between the dircct and indirect methods for
preparing the “Cash flow from operations”?
Continrung Case l3
6. We have a copy of a statement of cash flows for another firm. Why
is this firm adding back depreciation? 7. Someone told us that you could learn a lot from looking at the
accounts receivable adjustment to net income on this statement.
We don’t understand this at all. Mtat’s to be learned?
Prepare responses to their questions.
Continuing Case 14

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