Summary of Cash Flow Coverage
Nikolia Bazley, 8th Edition, Copyright 2000
Coverage found in chapters 4, 5 & 21
Chapter 4, The Income Statement and Statement of Cash Flows
Pages 134 – 138
Summary of coverage includes very brief discussion of the uses of the statement,
Explains the three major sections. Includes one complete exhibit using the
indirect method. Includes a short explanation of the direct method. Includes four
exercises. Includes four problems.
Chapter 5, Additional Aspects of Financial Reporting and Financial Analysis.
Includes calculation and usefulness of the following ratios:
Cash flows from operations to sales
Cash flow from operations to net income
Cash flow from operations per share
Cash flow from operations to maturing debt
Also mentions but does not discuss CFO divided by cash operating expenses, total
assets, or total liabilities, and CFO divided by the cash flow for investing
activities that are needed to maintain the operating capacity of the company.
There were no exercise or problems that dealt with cash flow.
Chapter 21, Statement of cash flows
Pages 996 – 1034
Emphasis on indirect method, only two pages in chapter on direct method. Direct
method is further covered in appendix.
Approximately 15 exercises assume indirect method, four exercises from
appendix assume direct method.
Approximately 13 problems assume indirect method, four problems from
appendix assume direct method.
Kieso, Weygandt & Warfield 10th Edition, 2002
Coverage found in chapters 5, 24
Chapter 5, The Balance Sheet and Statement of Cash Flows
Pages 206 – 212
Includes summary on purpose of cash flow statement, the content and format.
Includes one simple example of how a cash flow statement can be prepared from
a simple income statement and balance sheet. Indirect method is assumed. Two
pages on the usefulness of the cash flow statement. No mention of direct method.
Two ratios discussed:
Current cash debt coverage ratio
Cash debt coverage ratio
Seven exercises on cash flows and two problems all using indirect method.
Chapter 24, Statement of Cash Flows
Page 1310 – 1346
Discusses the purpose, content and format of the cash flow statement. First
example uses indirect method. The discussion follows of both direct and indirect
methods using simple examples. Indirect method and then direct method are
discussed in more detail. Advantages and disadvantages of both methods are
discussed. Comprehensive worksheet illustration is discussed and statement is
prepared using indirect method. Many special situation discussed.
Chapter has 13 brief exercises, two specify direct method and four specify
Chapter has 24 exercises, seven specify direct method and fourteen specify
Chapter has 12 problems , three specify direct method and seven specify indirect
method and two require preparation and comparison of both.
Spiceland, Sepe & Tomassini, Updated 2nd Edition, Copyright 2001
Coverage found in chapters 3, 22
Chapter 3, The Income Statement & Statement of Cash Flows
Pages 132 – 135
Very brief discussion on the usefulness of the statement and classification of cash
flows. Very brief discussion on direct and indirect methods. Four exercise and
one problem on cash flow.
Chapter 22, The Statement of Cash Flows Revisted
Pages 1024 – 1060
All discussion from pages 1024 – 1055 assume the direct method. The indirect
is presented as an alternative and discussed very briefly. Five “performance
ratios” which includes cash are listed as well as six “sufficiency ratios”
are listed. No discussion of the usefulness of these ratios is given. Appendix A is
an example of the indirect method using a spreadsheet and appendix B is an
example of the T account method. Out of 25 exercises six are indirect and two
are both direct and indirect. Out of 20 problems four ask for the indirect method
and four problems ask for the direct method but also include the separate schedule
using the indirect method for operating activities.