Analyzing statement of cash flow for Ford Motors Inc

Analyze the statement of cash flow for Ford motors using the 2018 statement

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.

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 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.
  1. Cash inflows
  2. Cash Outflows
• Define the components of the financing section of the statement of cash flows and which accounts an employee should evaluate to develop this section.
  1. Cash inflows
  2. Cash Outflows

• Define the components of the investing section of the statement of cash flows and which accounts an employee should evaluate to develop this section.
  1. Cash inflows
  2. Cash Outflows

• Explain what non-cash items must be disclosed on the statement of cash flows.
  1. Examples of non-cash items
     1. Depreciation
     2. Amortization
     3. Unrealized gain
     4. Unrealized loss
     5. Impairment expenses
     6. Stock-based compensation
     7. Provision of discount expenses
     8. Deferred income taxes
     9. Asset write-downs
     10. Provision for future losses
• Comment on the cash generated from operations versus other activities and why this is important to evaluating liquidity.

Hint:

1. Start off by giving a reason for this operational procedure
2. Different sections of the cash flow statement using the direct methods
3. Communicate that you are reviewing each section separately and explain how an employee should evaluate each section
4. I the Noncash, mention that you will be analyzing noncash items that must be disclosed on the cash flow statement and their effects on the net cash flow of the company.
5. Mention that you will be analyzing and detailing the relationship between cash generated from operations and other activities as well as liquidity.