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Cash flow statement
Prepared by : Jay
Raval
SUBMTED TO :-Dr. B.C.Ajmera Sir
CONTENT
Statement of Cash Flows in Perspective
Meaning
Classification
Advantages
Statement of Cash Flows in Perspective
Why the statement of cash flows is needed in addition to the balance sheet and the profit and loss account?
To provide relevant information about the cash receipts and payments of an enterprise evaluate an enterprise’s
liquidity financial flexibility profitability risk
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MEANINGCash – cash means all cash + cash equitable +
marketable securities + bank balance
Flow – flows means flow of cash from business to economy and economy to business that is cash inflows and cash outflows.
Statement – statement is a performance prescribed by Chartered Accountant Act,1948
Thus, Cash Flow Statement is a statement of inflows and outflows of cash and cash equivalents in an enterprise during a specified period of time.
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A Cash Flow Statement summarizes the causes of changes in cash position of a business enterprise between dates of two balance sheets.
A statement a Cash Flow reveals the movements of cash of a business enterprise for the given accounting period indicating specifically how the cash was generated.
Statement of Cash Flow is required for short range financial planning.
CLASSIFICATIONAs per Accounting Standard-3, the changes
resulting in cash inflows and cash outflows arise on account of three types of activities.
1. Operating activities
2. Investing activities
3. Financing activities
1. CASH FLOW FROM OPERATING ACTIVITIES
Operating Activities are the principle revenue producing activities of the enterprise and other activities that are not investing and financing activities.
Hence, these are the results of those transaction and events that determines the net profit or loss.
Cash Flows from Operating Activities
Payments to Suppliers and
Employees for Materials and Services
Operating Activities
Receipts from Customers for Sales of Goods and Services Payments to
Governments for Taxes and
Duties
Determining Net Cash Flow from Operating Activities: Direct Method
Cash received from customers Cash paid to suppliers and employees Duties & taxes paid
2. CASH FLOW FROM INVESTING ACTIVITIES
Investing activities include the purchase and disposal of long-term assets and other investments not included in cash equivalents.
The separate disclosure of Cash Flow arising from investing activities is important.
Cash Flows from Investing Activities
Receipts from Sales of
Fixed Assets
Payments for Purchase of Fixed Assets
Investing Activities
Receipts from Sales of
Investments and from
Collections of Loans Payments for
Purchases of Investments
and for Making of
Loans
Receipts from Interest and
Dividends on Loans and
Investments
Determining Cash Flow from Investing Activities
1. Plant and machinery purchase Disposal
2. Investments Purchases Sales
3. Interest received
4. Dividend received
3. CASH FLOW FROM FINANCING ACTIVITIES
The separate disclosure of Cash Flows arising from financing activities is important because it is useful in predicting funds to the enterprise.
Financing Activities are activities that result in changes in the size and composition of the owner capital and borrowings of the enterprise.
Cash Flows from Financing Activities
Payments for Dividends on Share Capital
Receipts from Issuance of
Share Capital
Payments for Principal on Debentures and Other
Borrowings
Financing Activities
Receipts from Issuance of Debentures
Receipts from Other Long-
term Borrowings
Payments for Interest on Debentures and Other
Borrowings
Determining Cash Flow from Financing Activities
1. Equity share capital Issuance Buy-back
2. Dividends paid
3. Secured loan and unsecured loan Issuance Repayment and redemption
4.Interest paid
Advantages of Cash Flow Statement
Helpful in planning and co-ordination.
Helpful in control.
Useful in internal financial management.
Knowledge of change in cash position.
Helpful in short-term financial decisions.