CHAPTER

THIRTEEN

The Cash Flow Statement and Decisions
Review

Previous chapters examined the information provided by the income statement, balance sheet, and statement of changes in owners’ equity. Fits
Where This Chapter In addition, a brief introduction to the cash flow statement was provided in Chapters
2 and 3.
Where This Chapter Fits

This chapter examines the cash flow statement in depth and focuses on how the information provided by this important statement is used for financial decisions.
Looking Ahead

Chapters 14 and 15 complete an in-depth look at the
Looking Ahead financial statements and how the information provided is useful for decision making.

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The

Personal

View

The

Business

View

Why am I always broke? My job pays a de-

The German company Siemens is a $60

cent salary, but somehow I never have

billion conglomerate that manufactures

cash when I need it. I get paid on the first

everything from power stations to semi-

of the month, but most of that goes for rent

conductors. The company is known for its

and food. My car payment is due on the

expert cash management and earns as

tenth, but I don’t get paid again until the fif-

much from interest income as from manu-

teenth. Once I make my car payment and

facturing. It is sometimes regarded as “a

pay the late charges, I’ve used up most of

bank with an electronics department at-

that paycheck. Then come the credit card

tached.” “[T]he company usually has the

bills. Luckily, I can just make the minimum

cashflow to fund even the largest invest-

payments and let the rest go, although the

ments, such as this year’s $1.5 billion ac-

interest charges are starting to be almost

quisition of Westinghouse.”1

as much as my purchases. Maybe I need

1
Laura Covill, “Siemens The Financial Engineer,”