Cash flow is an important consideration for all companies, but particularly for a giant company like Kraft Foods Inc. as it continuously expands its global reach. Kraft Foods Inc. 's 2005 annual report includes its statement of cash flows. This statement is one of the major financial statements required for companies to provide information to investors, creditors, and others that is in compliance with generally accepted accounting principles. This statement displays cash flows in three major categories: operating activities, investing activities, and financing activities. In the case of Kraft Foods Inc. for 2005, cash provided by operating activities was approximately $3.5 billion. This cash was used to support major capital expenditures and to retire debt. Efficiently managing cash flows of this magnitude is an important responsibility of the company's top leadership and is critical for the company's continued success.
AFTER STUDYING THIS CHAPTER, YOU SHOULD BE ABLE TO:
Explain the purposes and uses of a statement of cash flows. |
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Describe how cash transactions are classified in a statement of cash flows. |
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Compute the major cash flows relating to operating activities. |
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Compute the cash flows relating to investing and financing activities. |
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Distinguish between the direct and indirect methods of reporting operating cash flows. |
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Explain why net income differs from net cash flows from operating activities. |
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Compute net cash flows from operating activities using the indirect method. |
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Discuss the likely effects of various business strategies on cash flows. |
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Explain how a worksheet may be helpful in preparing a statement of cash flows. |