Question About cash flow statement?

Question

I have a question about Starbucks' statement of cash flows, in each of the past four years, the statement provided by various websites list Starbucks as having an increase in Cash and Equiv., but on the balance sheet it shows a decline in cash from 2004 to 2005, how is this possible? I thought the purpose of the statement of cash flows was to explain the change in this asset? here is a link to Yahoo's finance info on Starbucks : http://finance.yahoo.com/q/bs?s=SBUX&annual

Answer 1

Normally the change in cash on the balance sheet equals the change in cash on the Cash Flow Statement.. I have seen this before when they arent equal. Usually there is some kind of adjustment or restatement to the financial statements when it happens. This article may help.

Answer 2

The purpose of the cash flow statement is to turn the accrual method of accounting into cash based. That means that as the accounts receivable grow, the cash flow diminishes. The accumulated depreciation is a huge factor of the balance sheet (contra asset to fixed assets), but doesn't actually represent a cash flow of money. Not all expenses are cash flows; not all revenues are cash flows. The cash flow statement makes all of the accrual entries, which must use GAAP's matching principle, relate to the actual flow of cash.

Therefore, once the accruals are added or deducted back in, the overall net effect is revealed on the cash flow statement, which is a better presentation of the solvency of the company.

Answer 3

The income statement allows you to subtract out depreciation, amortization, and depletion when figuring out net income but these differ from other expenses in that you don't write a check for them like you would a phone bill. When you figure out cash flows you take this into account - so this statement gives you how cash actually moves into and out of your company.