Competency
Interpret the components of a cash-flow statement to describe the liquidity of an organization.
Student Success Criteria
View the grading rubric for this deliverable by selecting the "This item is graded with a rubric" link, which is located in the Details & Information pane.
Scenario
You presently work for Ford Motor Company in the Accounting and Reporting department. As part of the annual requirements of a publicly traded company, an external auditing firm just completed the required audit of Ford's financial statements. The auditing firm determined the internal control procedures Ford developed were sufficient but noted Ford Motor Company could have benefited from more detailed written procedures in preparing the statement of cash flows. You have been assigned the task of analyzing procedures for developing the statement of cash flows.
In analyzing procedures for developing the statement of cash flows, you have been asked to explain the purpose of a cash flow statement and how beneficial it is for the company. The Operational Procedure should include the following sections:
- Purpose – Cash Flow statement and the benefits
- Introduction – Cash Flow Statement and explanation of cash generated from operations versus other activities and why this is important to evaluate liquidity for Ford Motors.
- Scope – Components of the cash flow statement
- Procedures
- Procedures for Operating Section – Cash Flow Statement
- Procedures for Financing Section – Cash Flow Statement
- Procedures for Investing Section – Cash Flow Statement
- Procedures for Non-Cash items
Instructions
Write an operational procedure to explain the process staff should follow to develop the different sections of the statement of cash flows using the indirect method.
Use the following template for your work:
Module 2 Operational Procedure Template.docx
Use the 2018 Statement of Cash Flows for Ford Motor Company and include the following:
- In the procedures:
- Define the components of the operating section of the statement of cash flows and which accounts an employee should evaluate to develop this section.
- Define the components of the financing section of the statement of cash flows and which accounts an employee should evaluate to develop this section.
- Define the components of the investing section of the statement of cash flows and which accounts an employee should evaluate to develop this section.
- Explain what non-cash items must be disclosed in the statement of cash flows.
- Analyze the 2018 Statement of Cash Flows and explain the relationship among cash generated from operations, other cash-generating activities, and liquidity.
NOTE – Be sure the documents display proper grammar, spelling, punctuation, and sentence structure.
Assessment Requirements/Submission Requirement:
Operational Procedure Template – Microsoft Word
Resources
Research
- Use Mergent Online to access financial statements for Ford Motor Company (be sure to search for and select "Ford Motor Co.”)
A – 4 – Mastery
Accurately defines components of the operating section of the statement of cash flows.
A – 4 – Mastery
Accurately defines components of the financing section of the statement of cash flows.
A – 4 – Mastery
Accurately defines components of the investing section of the statement of cash flows.
A – 4 – Mastery
Clearly and accurately explains what non-cash items must be disclosed on the statement of cash flows.
A – 4 – Mastery
Accurately analyzes the 2018 Statement of Cash Flows and eloquently explains the relationship among cash generated from operations, other cash-generating activities and liquidity.
