Lesson 4 of 6 · 14 min
Investing and financing cash flows from balance sheet changes
Investing and financing cash flows are reported gross and directly under both methods, and when they are not given you can rebuild them from the changes in long-term asset, debt and equity accounts.
In short
- Investing and financing sections look the same whether operating cash uses the direct or indirect method.
- Cost of PP&E sold = opening gross PP&E + purchases − closing gross PP&E.
- Accumulated depreciation on assets sold = opening accumulated depreciation + depreciation expense − closing accumulated depreciation.
- Cash from sale = book value of assets sold + gain (or − loss).
- Debt and share capital changes show issues and repayments or buybacks; dividends paid = opening retained earnings + net income − closing retained earnings.
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