Ross et al.: Fundamentals II. Financial Statements 3. Working with Financial of Corporate Finance, Sixth and Long-Term Financial Statements Edition, Alternate Edition Planning tion and it was presented in terms of the changes in net working capital rather than cash flows. We will work with the newer cash format.

We present a particular format for this statement in Table 3.3. The basic idea is to group all the changes into three categories: operating activities, financing activities, and investment activities. The exact form differs in detail from one preparer to the next.

Don't be surprised if you come across different arrangements. The types of information presented will be very similar; the exact order can differ. The key thing to remember in this case is that we started out with $84 in cash and ended up with $98, for a net increase of $14. We're just trying to see what events led to this change.

Going back to Chapter 2, we note that there is a slight conceptual problem here. Interest paid should really go under financing activities, but unfortunately that's not the way the accounting is handled. The reason, you may recall, is that interest is deducted as an expense when net income is computed. Also, notice that the net purchase of fixed assets was $149. Because Prufrock wrote off $276 worth of assets (the depreciation), it must have actually spent a total of $149 + 276 = $425 on fixed assets.

Once we have this statement, it might seem appropriate to express the change in cash on a per-share basis, much as we did for net income. Ironically, despite the interest we might have in some measure of cash flow per share, standard accounting practice expressly prohibits reporting this information. The reason is that accountants feel that cash

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