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    CASH FLOWSTATEMENT

    Presented By :Jatin Mann

    Ashima Dawar

    Harshit Bansal

    Shreya Gupta

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    INTRODUCTION

    Cash flow Statement is a statement showing inflows and

    outflows of cash during a particular period

    This statement assesses the ability for the enterprise togenerate cash and cash equivalents.

    Predict future cash flows.

    Evaluate management decisions.

    Determine the ability to pay dividends to stockholdersand payments to creditors.

    It also assesses the liquidity and solvency of the

    enterprise.

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    What is cash?

    Cash in hand

    Cash in the bank

    Cash equivalents - highly liquid, short-term investments

    that can be converted into cash with little delay

    Money-market investments

    Government Treasury bills

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    Basic form of cash flow

    statement Cash Flow From Operating Activities

    Direct method or indirect method (direct

    requires also a reconciliation of net

    income to cash flow from operating

    activities)

    Cash Flow from investing activities

    Cash Flow from financing activities

    Total (positive or negative) cash flow is addedto beginning cash balance and should result in

    ending cash balance

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    Definitions

    Cash comprises of cash in hand and demand deposits with

    banks. Cash equivalents are short term, highly liquid investments

    that are readily convertible into known amounts of cash and

    which are subject to an insignificant risk of changes in value.

    Cash flows are inflows and outflows of cash and cash

    equivalents.

    Operating activities are the principal revenue-producing

    activities of the enterprise and other activities that are not

    investing or financing activities.

    Investing activities are the acquisition and disposal of

    long-term assets and other investments not included in cash

    equivalents.

    Financing activities are activities that result in changes in the

    size and composition of the owners capital (including preference

    share

    capital in the case of a company) and borrowings of the enterprise

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    Objectives

    1. To provide information about the cash inflows andcash outflows from operating, financing andinvesting activities of the firm.

    2. To show the impact of the operating, financingand investing activities on cash resources.

    3. To tell how much cash came in during the period,how much cash went out and what the net cashflow was during the period.

    4. To explain the causes for changes in cashbalance.

    5. To identify the financial needs and help inforecasting future cash flows.

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    limitations

    Not suitable for judging the liquidity

    Possibility of window dressing

    It ignores non-cash transactions

    It ignores the accrual concept of accounting

    No substitute for an income statement

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    Categories Of Cash

    Inflows/Outflows

    Operating Activities Investing Activities

    Financing Activities

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    Operating Activities

    Operating Activities are the principlerevenue generating activities of the

    enterprise.

    Operating activities create revenues,expenses, gains, and losses.

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    Operating Activities

    Cash Inflow Cash Sale

    Cash receivedfrom debtors

    Cash receivedfrom fees and

    commission Royalty and other

    revenues

    Cash Outflow Cash purchase

    Payment to

    creditors Cash operating

    expenses

    Payment of wages

    Income tax

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    Investing Activities

    Investing activities includes theacquisition and disposal of long term

    assets and other investments not

    included in cash equivalent. Investing activities increase and

    decrease long-term assets.

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    Investing Activities

    Cash Inflow Sale of fixed assets

    Sale of investments Interest received

    Dividend received

    Cash Outflow Purchase of fixed

    assets

    Purchase of

    investment

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    Financing Activities

    Financing Activities are those activitiesthat result in change in the size and

    composition of owners capital and

    various borrowings of the enterprise. Financing activities obtain cash from

    investors and creditors.

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    Financing Activities

    Cash Inflow Issue of shares

    Issue of debentures

    in cash Proceeds from long

    term borrowings

    Proceeds from short

    term borrowings

    Cash Outflow Cash repayment of

    amount borrowed

    Interest paid on loan Interest paid on

    debentures

    Dividend paid on

    equity Dividend paid on

    preference sharecapital

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    Cash flow statement

    format of indirect method

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    Add : Decrease in Current Assets

    Increase in Current Liabilities

    Less : Increase in Current Assets

    Decrease in Current LiabilitiesCash generated from operating activities

    Income Tax paid

    Cash flow before extraordinary items

    (+) or (-) Extraordinary items

    Net cash from operating activities

    B. Cash flows from Investing Activities :

    Purchase of fixed assets

    Sale of fixed assets

    Purchase of investments (long term)

    Sale of investments (long term)

    Interest received

    Dividend received

    Net cash from investing activities

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    C. Cash flows from Financing Activities :

    Proceeds from issue of share capital

    Proceeds from long-term borrowings

    Repayment of long-term borrowings

    Interest paidDividend paid

    Net cash from financing activities

    Net Increase (or decrease) in cash and cash

    equivalents(A+B+C)

    Cash and cash equivalents at the beginning of the

    period

    Cash and cash equivalents at the end of the period

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    EXAMPLE