Understanding Cash Flow Activities and Total Net Cashflow
- Drake issued 10,000 shares of common stock for $40,000
Classification: Financing Activity (Inflow) - Drake collected $80,000 from customers on Accounts Receivables
Classification: Operating Activity (Inflow) - Drake Paid $5,000 in interest payments on their bonds
Classification: Operating Activity (Outflow) - Drake purchased a new copy machine and paid cash of $35,000
Classification: Investing Activity (Outflow) - Drake sold their old copy machine for $2,000 cash
Classification: Investing Activity (Inflow) - Drake paid a $4,500 dividend to shareholders
Classification: Financing Activity (Outflow) - Drake borrowed $40,000 cash from the bank on December 28, 2019
Classification: Financing Activity (Inflow) - Drake purchased a patent for $15,000 cash
Classification: Investing Activity (Outflow) - Drake paid $65,000 cash in wages during 2019
Classification: Operating Activity (Outflow) - Drake paid 2018 taxes due in the amount of $10,500 on April 15, 2019
Classification: Operating Activity (Outflow)
Classification of Cash Flow Activities
In summary, the classifications of each transaction in terms of cash flow activities are as follows:
- Operating Activities: +$80,000 (Inflows) - $65,000 (Outflows) - $5,000 (Outflows) - $10,500 (Outflows) = $9,500 (Inflow)
- Investing Activities: -$35,000 (Outflows) + $2,000 (Inflows) - $15,000 (Outflows) = -$48,000 (Outflow)
- Financing Activities: +$40,000 (Inflow) - $4,500 (Outflow) + $40,000 (Inflow) = $75,500 (Inflow)
Understanding Total Net Cashflow
Based on the calculations from the transactions, operating activities resulted in a net inflow of $9,500, investing activities resulted in a net outflow of $48,000, and financing activities resulted in a net inflow of $75,500.
These classifications are crucial for interpreting the cash flow statement and assessing a company's financial stability and health. By categorizing each transaction into operating, investing, or financing activities, it becomes easier to analyze how cash is being generated or used within the business.