CASH FLOW

Dadasaheb Narale Roll No.10 Sinhgad Institute Of Business Management

Cash?

Cash in hand, demand deposits with banks Most liquid of the all the current asset Cash is gasoline that makes business run

Cash flow

Cash flow can be define as the way of money moves into and out of business It is the different between just being able to open a business and being able to stay in business. Money coming into business is called cash inflow. Money going out from the business is called cash outflow

Sources of cash inflows

Operation of the business Issue of shares for cash Issue of debenture or bond for cash Borrowing the term loan form bank Sales of fixed asset for cash Sales of other non-current asset Cash collection form debtors

Uses of cash outflows

Payments of dividend in cash Repayments of borrowings Redemption of preference shares in cash Purchase of fixed assets Acquisition of other current asset as securities Payments to creditors

Cash flow statement

Cash flow statement concerned with the flow of cash in and cash out in business. In financial accounting cash flow statement also know as statement of cash flow or statement of fund flow is a financial statement that shows changes in balance sheet accounts and income affect cash and cash equivalents.

Objectives of cash flow statement

Identify the causes of increase or decreases in the cash. Understand cash generated on account of business operation during the year. Cash impact on the current asset and liabilities. Investment of financing pattern. Maintenance of adequate liquidity. Projections of future cash flows.

Cash flow activities

The cash flow statement is partitioned in to three segments. Cash flow from the Operating Activities Cash flow from the Investing Activities Cash flow form the Financing Activities

Operating Activities
Operating activities include the production, sales and delivery of the companys product. This could includes purchasing raw materials, building inventory, advertising and shipping the product.

Operating activities

Cash inflow

cash outflow

Cash sale cash purchase Cash received form debtors payment to creditors Cash recd from commission & fees cash operating expenses Royalty and other revenues payment of wages income tax

Chief operating activities

Cash receipts from sale of goods and rendering services. Receipts for the sale of loan, debt or equity. Interest received on loans. Payment to suppliers for goods and services. Payment to employees. Interest payment. Buying merchandise

Investing activities

Cash inflow
Sales of fixed assets assets Sales of Investment Interest received Dividend received

cash outflow
Purchase of fixed Purchase of Investment

Investing Activities

Purchase of fixed assets.(both tangible and intangible) Sales of fixed assets.(both tangible and intangible) Loan made to suppliers or received from customers. Payments related to mergers and acquisitions. Interest or dividend received on long term investments

Financing activities

Cash inflow
Issue of Shares borrowing Issue of debenture in cash Proceeds from long term short term borrowings

cash outflow
Cash payment on amount Interest paid on debentures Dividend paid on Equity and preference share capital

Financing Activities

Issue of equity share capital Buyback of equity share capital Dividend paid Issue of preference share capital Redemption of preference share capital Preference dividend paid Issue of debentures Redemption of debentures Long term loan obtained Repayment of long term loan Interest paid on debentures, long term loans and borrowings

Cash flow statement

Particulars Rs.

A) Cash flow from operating activities B) Cash flow from investing activities C) Cash flow form financing activities
Net cash flow (A+B+C) Add : Opening cash and bank balances Closing cash and bank balances

XXXX XXXX XXXX

XXXX XXXX XXXX

Cash flow statement using the direct method

Cash flows from operating activities Cash receipts from customers Cash paid to suppliers and employees Cash generated from operations (sum) Interest paid Income taxes paid Net cash flows from operating activities Cash flows from investing activities Proceeds from the sale of equipment 7,500 9,500 (2,000 ) 7,500 (2,000 ) (3,000 ) 2,500

Dividends received
Net cash flows from investing activities Cash flows from financing activities Dividends paid Net cash flows used in financing activities Net increase in cash and cash equivalents

3,000
10,500

(2,500 ) (2,500)

10,500 1,000

Cash and cash equivalents, beginning of year

Cash Flow Statemen t Indirect Method

XYZ co. Ltd. Cash Flow Statement (all numbers in millions of Rs.) Net income Operating activities, cash flows provided by or used in: Depreciation and amortization Adjustments to net income Decrease (increase) in accounts receivable Increase (decrease) in liabilities (A/P, taxes payable) Decrease (increase) in inventories Increase (decrease) in other operating activities Net cash flow from operating activities Investing activities, cash flows provided by or used in: 21,538 2,790 4,617 12,503 131,622 -(173,057) 13

Capital expenditures
Investments Other cash flows from investing activities Net cash flows from investing activities Financing activities, cash flows provided by or used in: Dividends paid Sale (repurchase) of stock Increase (decrease) in debt Other cash flows from financing activities Net cash flows from financing activities Effect of exchange rate changes

(4,035)
(201,777) 1,606 (204,206) (9,826) (5,327) 101,122 120,461 206,430 645

Net increase (decrease) in cash and cash equivalents

2,882

Importance of cash flow statement

Helps in indicating the changes in the liquidity position of the company To find out whether the cash balance has increased or decreased, what reason for the same Understanding how the cash from the sale of assets or issue of shares have been utilized Used for planning, forecasting and budgeting the cash resources of the company. Eg. Obtaining bank loans to buy new assets, to plan temporary investment of excess cash etc.

Thank You