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Cash Flow Statement

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9 views18 pages

Cash Flow Statement

Uploaded by

chandreshpadmani9993
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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CASH FLOW STATEMENT

CASH FLOW STATEMENT (CFS)

• The CFS provides information about the company’s cash


receipts and payments during a period.
• CFS follows the cash accounting process in contrast to
Income statement / Balance Sheet which are based on
accrual concept.
• Cash is blood of the business and without it business cannot
survive.
• Hence it is important to understand the movement of cash
during a period.
DIFFERENCE BETWEEN INCOME
STATEMENT AND CFS
Income Statement CFS Balance Sheet
• Revenue earned • Cash collected from • Addition of machinery
(collected or not) customers (whether full payment
• Cost of production • Cash paid to suppliers for has been made or not)
incurred (whether paid or purchases • Reduction in loan balance
not) • Cash paid to employees • Increase in equity
• Operating expenses • Cash paid for operating
incurred (whether paid or expenses
not) • Cash paid as interest on
• Financial cost incurred loan
(whether paid or not) • Cash paid for purchase of
machinery
• Cash paid for repayment
of loan
• Cash received by raising
additional equity
CLASSIFICATION OF CASH FLOW
ACTIVITIES
• Cash flow from operating activities
• Include company’s day to day activities that create revenue.
• Example, cash collected from customers, cash paid to suppliers, cash
paid for expenses such as salaries, sales and general administration
expenses etc.

• Cash flow from Investing activities


• Include buying or selling long term assets such as property, plant and
equipment, intangible assets, investments in equity or debt securities
etc.

• Cash flow from Financing activities


• Include obtaining or repaying capital such as equity or debt.
FIRST LEVEL FORMAT OF CFS

Cash Flow from Operating Activities XXXX


Cash flow from Investing Activities XXXX
Cash flow from Financing Activities XXXX
Net Increase/ Decrease in Cash XXXX
Cash balance at the beginning of the year
XXXX
Cash balance at the end of the year
XXXX
CASH FLOW FROM OPERATING ACTIVITIES
(INDIRECT METHOD)
• Profit Before tax XXXX
• Add: Non-Cash expenses (Dep.) XXXX
• Add: Non-Operating expenses XXXX
• Interest on loan XXX
• Loss on sale of assets etc. XXX

• Less: Non-operating income XXXX


• Dividend Income XXX
• Interest income XXX
• Profit on sale of assets XXX

• Add/ (Less) decrease/ (increase) in current assets XXXX


• Add/ (Less) increase / (Decrease) in current liabilities XXXX
• Cash generated from operations XXXX
• Less Income Tax paid XXXX
• Cash flow from Operating Activities XXXX
CASH FLOW FROM OPERATING ACTIVITIES
• Praveen Co. had the following information available related to the year ending
Mar 31st 2022:

 Cash sales were Rs 25,000 and Credit sales were Rs 4,36,000. Debtors (Gross)
were Rs 78,000 and 49,000 at the beginning and end of FY 22-23. Debtors of Rs
16,000 were written off during the year.

COGS was Rs 2,30,000 and selling and administrative expenses were Rs 61,000.
At the beginning of FY 22-23 inventory and creditors were Rs 43,000 and Rs
62,000 respectively. At the end of the year, these were respectively, Rs 51,000
and Rs 67,000. Depreciation expense for the year was Rs 39,000.

Income tax expense for 2010 was Rs 53,000. Income tax payable at the
beginning and at the end of FY was Rs 14,000 and Rs 11,000 respectively.

• Compute net cash flow from operating activities using direct method.
• Winding Road Cellular accountants have assembled the
following data for the year ended March 31, 2023:

• Compute Cash flow from Operating activities.


• Health Sports Company had the following beginning balances as
at January 1, 2023 and reported the following data at year ended
December 31, 2023:

• Net income for 2024 was $28,000. Net income included a $5,000
loss on the sale of equipment and a depreciation expense of
$6,000.
• Compute Cash Flow from Operating Activities
CASH FLOW FROM INVESTING ACTIVITIES

• Payment for purchase of PPE


• Proceeds on sale of PPE
• Payment for purchase of intangibles
• Proceeds on sale of intangibles
• Money invested in debt/equity securities
• Proceeds from sale of debt/ equity instruments
• Dividend or interest on investments received
CASH FLOW FROM INVESTING ACTIVITIES
CASH FLOW FROM FINANCING ACTIVITIES

• Money raised from debt/ Equity


• Debt repaid/ Equity bought back
• Interest on loan paid
• Dividend paid
CASH FLOW FROM FINANCING ACTIVITIES
• Consider the following transactions:
a. Purchased equipment for $130,000 cash.
b. Issued $14 par preferred stock for cash.
c. Cash received from sales to customers of $35,000.
d. Cash paid to vendors, $17,000.
e. Sold building for $19,000 gain for cash.
f. Purchased treasury stock for $28,000.
g. Retired a notes payable with 1,250 shares of the company’s common
stock.
Identify the category of the statement of cash flows in which each
transaction would be reported.
• Consider the following facts for Java Jolt:
a. Beginning and ending Retained Earnings are $45,000 and $70,000,
respectively. Net income for the period is $60,000.
b. Beginning and ending Plant Assets are $124,500 and $134,500,
respectively.
c. Beginning and ending Accumulated Depreciation—Plant Assets are
$21,500 and $26,500, respectively.
d. Depreciation Expense for the period is $17,000, and acquisitions of
new plant assets total $29,000. Plant assets were sold at a $5,000 gain.
Requirements
1. How much are cash dividends?
2. What was the amount of the cash receipt from the sale of plant
assets?
CASH FLOW ANALYSIS
• What are the major sources and uses of cash flow?
• Is operating cash flow positive and sufficient to cover investing cash flow?
• What are major determinants of operating cash flow?
• Is operating cash flow higher/lower than the operating income (EBIT)?
• How consistent are operating cash flows?
• Are investing cash flows positive or negative?
• What is the nature of investing cash flows? Is it investments in PPE or
financial instruments?
• What is the nature of financing cash flows?
• Is the company borrowing more and more every year?
CASH is KING !!

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