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Worked-example setupScope and assumptions
- Cedar Trail and every amount are fictional and supplied for instruction.
- Population, transaction classification, gross presentation, acquisition, disposal, and exchange-rate conclusions are supplied; the model does not make them.
- Receipt and payment inputs are nonnegative magnitudes; investing and financing inputs are signed statement effects.
- The same entity, period, currency, and population scope governs both operating methods and the cash rollforward.
- Period
- Year ended December 31, Year 4
- Units
- US dollars
- Rounding
- Retain full precision; display whole dollars with commas
Problem
Cedar Trail's controller prepared operating cash flow by subtracting expense from revenue and reported the indirect method as an additional source of cash. The debt line is a net account change, the acquisition line is total consideration, and the disposal line is the gain. Rebuild one statement from the supplied transaction ledger.
Direct operating construction
Gross customer and other operating receipts total $990,000. Supplier, employee, interest, and income-tax payments total $770,000. Therefore:
$990,000 operating receipts - $770,000 operating payments = $220,000 CFO
These amounts come from bank rows and rollforwards after removing noncash, acquisition, disposal, and currency causes. They are not the revenue and expense captions.
Indirect cross-check
Start with $160,000 net income. Add $75,000 depreciation and $15,000 share compensation; remove the $20,000 disposal gain; and apply signed receivable, inventory, and payable timing adjustments of $(25,000), $(10,000), and $25,000. The adjustments total $60,000 and produce the same $220,000 operating subtotal. The methods agree; they are not added together.
Investing, financing, and the endpoint
Equipment and security purchases are $(260,000). The acquisition uses $320,000 cash consideration less $45,000 acquired cash, or $(275,000). The disposal provides $210,000 cash proceeds less $30,000 divested cash, or $180,000. Net investing cash is therefore $(355,000).
Borrowing proceeds of $300,000, principal repayments of $(120,000), and dividends of $(60,000) produce $120,000 financing cash flow. The three sections change cash by $(15,000); a separate $5,000 exchange-rate effect rolls the $600,000 opening population to $590,000.
The $50,000 transfer into an included restricted account nets to zero. The $90,000 note-financed equipment and $60,000 lease commencement are noncash and do not create offsetting section lines. Arithmetic passes only after each classification and population conclusion has been supplied and documented.
Quantitative companions
Choose from 2 ways to work with this calculation.
Verified calculation · advanced cash flow analysis
The curriculum loader recomputed this example before it entered the site build. Expand any structured input to inspect the stated facts.
- business combinations
- 1 field
Inspect data
{
"northstar_acquisition": {
"cash_acquired": 45000,
"cash_consideration": 320000
}
}- business disposals
- 1 field
Inspect data
{
"legacy_sensor_disposal": {
"cash_divested": 30000,
"cash_proceeds": 210000
}
}- direct operating payments
- 4 fields
Inspect data
{
"employees": 160000,
"income_taxes": 30000,
"interest": 30000,
"suppliers": 550000
}- direct operating receipts
- 2 fields
Inspect data
{
"customer_collections": 900000,
"other_operating_receipts": 90000
}- ending cash
- 430,000
- ending cash equivalents
- 80,000
- ending restricted cash
- 80,000
- financing cash flows
- 3 fields
Inspect data
{
"borrowing_proceeds": 300000,
"dividends_paid": -60000,
"principal_repayments": -120000
}- fx effect
- 5,000
- indirect adjustments
- 6 fields
Inspect data
{
"depreciation": 75000,
"disposal_gain": -20000,
"inventory_timing": -10000,
"payables_timing": 25000,
"receivables_timing": -25000,
"share_compensation": 15000
}- internal population transfers
- 2 fields
Inspect data
{
"restricted_payroll_account": 50000,
"unrestricted_account": -50000
}- investing cash flows
- 2 fields
Inspect data
{
"equipment_purchases": -250000,
"security_purchases": -10000
}- net income
- 160,000
- noncash activities
- 2 fields
Inspect data
{
"equipment_acquired_by_note": 90000,
"lease_commencement": 60000
}- opening cash
- 500,000
- opening cash equivalents
- 80,000
- opening restricted cash
- 20,000
- reported direct operating cash flow
- 220,000
- reported ending cash population
- 590,000
- reported financing cash flow
- 120,000
- reported indirect operating cash flow
- 220,000
- reported investing cash flow
- -355,000
- reported net change before fx
- -15,000
Recomputed result
| Measure | Value |
|---|---|
| acquisition net cash flow | 275,000 |
| actual ending cash population | 590,000 |
| cash population difference | 0 |
| direct indirect difference | 0 |
| direct operating cash flow | 220,000 |
| disposal net cash flow | 180,000 |
| expected ending cash population | 590,000 |
| financing cash flow | 120,000 |
| fx effect | 5,000 |
| indirect operating cash flow | 220,000 |
| internal transfer sum | 0 |
| investing cash flow | -355,000 |
| net change before fx | -15,000 |
| noncash activity total | 150,000 |
| opening cash population | 600,000 |