This document provides steps and formulas for identifying sources and uses of funds in a statement of cash flows. It outlines calculating changes in the balance sheet, identifying sources like decreases in assets/increases in liabilities and uses like increases in assets/decreases in liabilities. Sources also include net income and depreciation, while uses include losses, dividends, and changes in retained earnings. Formulas are given for calculating net changes in cash equivalents and net fixed assets.
This document provides steps and formulas for identifying sources and uses of funds in a statement of cash flows. It outlines calculating changes in the balance sheet, identifying sources like decreases in assets/increases in liabilities and uses like increases in assets/decreases in liabilities. Sources also include net income and depreciation, while uses include losses, dividends, and changes in retained earnings. Formulas are given for calculating net changes in cash equivalents and net fixed assets.
This document provides steps and formulas for identifying sources and uses of funds in a statement of cash flows. It outlines calculating changes in the balance sheet, identifying sources like decreases in assets/increases in liabilities and uses like increases in assets/decreases in liabilities. Sources also include net income and depreciation, while uses include losses, dividends, and changes in retained earnings. Formulas are given for calculating net changes in cash equivalents and net fixed assets.
1. Step 1- Calculate the changes (∆𝑡1 − ∆𝑡0 ) in the balance sheet.
2. Step 2- Identify the sources and uses Sources of funds Asset (decrease) Liability (increase) Net income / EAT/ Net profit after tax Depreciation and other non-cash expenditures Uses of funds Asset (increase) liability (decrease) Net loss operations Dividend payment ∆𝑅𝑒𝑡𝑎𝑖𝑛𝑒𝑑 𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠 = 𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒 − 𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑜𝑟 𝐵𝑎𝑙𝑎𝑛𝑐𝑒𝑑 𝑅𝑒𝑡𝑎𝑖𝑛𝑒𝑑 𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑡0 + 𝐸𝐴𝑇 − 𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑𝑡1 = 𝐵𝑎𝑙𝑎𝑛𝑐𝑒𝑑 𝑅𝑒𝑡𝑎𝑖𝑛𝑒𝑑 𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑡1 *notes the groups of net income such as EAT/Profit tax/ Net profit/ Net Profit after tax/ Net income 3. Calculate NCE 𝑁𝐶𝐸 = 𝑁𝑒𝑡 𝐹𝑖𝑥𝑒𝑑 𝐴𝑠𝑠𝑒𝑡1 − 𝑁𝑒𝑡 𝐹𝑖𝑥𝑒𝑑 𝐴𝑠𝑠𝑒𝑡0 + 𝐷𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛 *Student need to identify weather NCE is in the group of sources and uses of fund based on the ∆ 𝑣𝑎𝑙𝑢𝑒 𝑜𝑓 𝑁𝐶𝐸 . If the ∆ 𝒗𝒂𝒍𝒖𝒆 𝒐𝒇 𝑵𝑪𝑬 increase (+) it indicate uses of fund while if the ∆ 𝒗𝒂𝒍𝒖𝒆 𝒐𝒇 𝑵𝑪𝑬 decrease (-) it indicate sources of fund. * Always try to get the value of depreciation from income statement due to the actual depreciation. 4. Make a statement of sources and uses of fund.
Additional formula 𝑵𝑭𝑨 = 𝑮𝒓𝒐𝒔𝒔 𝒇𝒊𝒙𝒆𝒅 𝑨𝒔𝒔𝒆𝒕 − 𝑨𝒄𝒄𝒖𝒎𝒖𝒍𝒂𝒕𝒆𝒅 𝑫𝒆𝒑𝒓𝒆𝒄𝒊𝒂𝒕𝒊𝒐𝒏