Welcome to cash flow statement part 2. I hope you enjoyed that previous parts of our financial statements series.
Cash Flow Investing Activities
Investing activities effect cash both up and down. When the company pays for securities they spend cash and when they sell securities. The securities also mature and the company receives cash. In this section you will add all the numbers to cash.
Purchase of marketable securities on the cash flow statement refers to stocks, bonds or other investments that the company purchased. In the case below the company spent money on marketable securities so you will add the negative number. This will reduce cash on the balance sheet.
Proceeds from the maturities of marketable securities is the securities that have paid out in the quarter. The bond, CD, or other investment paid cash on their prior investment. This increases the cash on the balance sheet.
The sale of marketable securities on the cash flow statement refers to the sale of stocks, bonds, options, or other investments. These securities did not mature but were sold or liquidated. Anytime something is sold it adds cash to the balance sheet.
Payments for acquisition of property, plant and equipment reduce the cash on the balance sheet. This includes the purchase of buildings, machines and land. The negative number on the cash flow statement indicates that this reduces the amount of cash on the balance sheet.
From time to time businesses buy other businesses. Payments made in connection with business acquisitions are related to the purchase of business. The purchase of businesses reduces cash on the balance sheet so it is subtracted.
Cash used in the purchase of non-marketable securities is used to buy parts of non-public companies. An example would be buying into a private company like Uber. This cash has been spent and reduces the cash on the balance sheet so it is subtracted.
Other is similar to the cash in the couch from the last sections. Cash is spend and found in other investing activities that are not included in other sections of the cash flow statement.
Cash generated by investing activities is the total of the prior sections.
Cash Flow Statement Financing Activities
Payments for taxes related to net share settlement of equity awards. Simply put they paid taxes to the government for giving equity to executives. This reduces the cash on the balance sheet.
The Payments for dividends and dividend equivalents is simply paying dividends. This reduces the cash on the balance sheet so it is subtracted from cash.
If in the quarter the company buys back stock it is categorized as repurchase of common stock. This is a reduction in the total cash that the company has on hand.
Proceeds from the issuance of term debt is the cash received after issuing bonds or other debt instruments. This is added in because it increases the cash on the balance sheet.
Change in commercial paper comes from the balance sheet changes quarter over quarter. This number will be added or subtracted depending on the use of commercial paper in the quarter.
Cash used in financing activities is the total cash used in the prior categories.
Net Cash Change
Increase in cash and cash equivalents is the net change on the cash flow statement from all of the sections that come before this.
Cash and cash equivalents, ending balance gets transferred to the balance sheet as the account with the same name.