18
No more ratios, please!

Cash-flow statement

Embed Size (px)

Citation preview

Page 1: Cash-flow  statement

No more ratios, please!

Page 2: Cash-flow  statement

Cash flow statement

Prepared by : Jay

Raval

SUBMTED TO :-Dr. B.C.Ajmera Sir

Page 3: Cash-flow  statement

CONTENT

Statement of Cash Flows in Perspective

Meaning

Classification

Advantages

Page 4: Cash-flow  statement

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

Provide feedback about previous assessments

Page 5: Cash-flow  statement

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.

Page 6: Cash-flow  statement

Continue…

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.

Page 7: Cash-flow  statement

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

Page 8: Cash-flow  statement

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.

Page 9: Cash-flow  statement

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

Page 10: Cash-flow  statement

Determining Net Cash Flow from Operating Activities: Direct Method

Cash received from customers Cash paid to suppliers and employees Duties & taxes paid

Page 11: Cash-flow  statement

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.

Page 12: Cash-flow  statement

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

Page 13: Cash-flow  statement

Determining Cash Flow from Investing Activities

1. Plant and machinery purchase Disposal

2. Investments Purchases Sales

3. Interest received

4. Dividend received

Page 14: Cash-flow  statement

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.

Page 15: Cash-flow  statement

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

Page 16: Cash-flow  statement

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

Page 17: Cash-flow  statement

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.

Page 18: Cash-flow  statement