Note: In this second example of cash flow preparation, I am using the actual data of PEPSICO.
How to prepare cash flow from the start, you can check my post previous https://mohsinpage.wordpress.com/2010/11/15/preparation-of-cash-flows-statement-using-direct-method-example-1/. In my previous post used additional information extracted from the analyses of two year balance sheet. In this tutorial I will analyze whole two year balance sheet and will extract additional information in the categories of Operating activities, Investing activities and Financing Activities.
Analyze the Balance Sheet and income statement:
Below is the balance sheet of PEPSICO of 2000 and 2001 and income statement .of 2001
CONSOLIDATED BALANCE SHEET FOR PEPSICO,INC., AS OF DEC 31
Millions of dollars
|Cash and equivalent||1649||1505|
|Other Current Assets||752||791|
|Total Current Assets||5853||5617|
|Property, Plant and Equipment||12866||11466|
|Less: Accumulated Depreciation||5990||4908|
|Net Fixed Assets||6876||6558|
|Net Intangible Assets||4841||4714|
|Liabilities and Shareholders Equity|
|Debt Due for repayment||354||202|
|Other Current Liabilities||3406||3381|
|Total Current Liabilities||4998||4795|
|Long term debt||2651||3009|
|Other long term liabilities||5398||5349|
|Common Stock and other paid-in capital||35||667|
|Total Shareholders equity||21695||20757|
|Total Liability and Shareholders Equity||21695||20757|
Cash flows statement prepared using two financial statements, 1st Income Statement and 2nd Balance Sheet.
Before preparing cash flows statement,
a. Analyze Balance Sheet
b. Reordering of Income Statements
a. Analyze Balance Sheet:
we will analyze balance sheet each account of current year and previous year. From balance sheet analyzing we extract additional information (AI) for cash flows statement and regroup these additional information in three major categories.
- Operational Activities
- Investing Activities
- Financing Activities
In this tutorial, I will not explain the analyzing of balance sheet, I just provide data in the form of additional information according to above three categories. I will use this categorize additional information for cash flow preparation directly. Read more…