Reference no: EM133239503

Focus on THE COCA-COLA COMPANY SEC 10-K Corporation's Statement of Cash Flows

There are three main sections to the statement of cash flows: Cash flows from Operating Activities, Cash flows from Investing Activities, and Cash Flows from Financing Activities.

The balance sheet and income statement provide important information to prepare the cash flow statement. The relationship between these two financial reports with the statement of cash flows may be summarized as follows:

1. Net income (from the income statement) is a measure of operating activities, but the income statement reports net income based on financial accounting, not cash flows. Thus, net income is adjusted from a financial accounting measure back to a cash flow by adding back expenses that do not affect cash (such as depreciation), subtracting non-cash gains on the sale of assets, adding back non-cash losses from sales of assets, and adjusting for changes in current assets and current liabilities (information from the balance sheet).

2. Cash flows from the sale and purchase of long-term assets are reported in the investing activities section.

3. Cash flows from changes in long-term liabilities and owners' equity are reported in the financing activities section.

Reviewing your corporation's statement of cash flows: what do you learn about your SEC 10-K company as you view the four financial statements together? Do you see net income from the income statement on your statement of cash flows? Can you recalculate the amounts reflected as changes in current assets and current liabilities from your balance sheet(s)?

What is the primary source of cash? Operating, financing, or investing activities? Is this a financially healthy way for the corporation to obtain cash flows? What activities provide the healthiest source of cash flows (i.e., operating, investing, or financing activities)?