Statem ent ofCash Flow

is afinancial statement that shows how changes inbalance

sheetaccounts and income affectcash and cash

equivalents, and breaks the analysis down to operating,
investing and financing activities.
It is concerned with the flow of cash in and out of the

business.
It reflects a firm's liquidity.
It is acash basisreport on three types of financial activities:

operating activities, investing activities, and financing

activities. Non-cash activities are usually reported in
footnotes.

The Cash Flow Statem ent is intended

to:
Provide information on a

firm'sliquidityandsolvencyand its ability to

changecash flowsin future circumstances.
Provide additional information for evaluating changes in

assets, liabilities and equity.

Improve the comparability of different firms' operating

performance by eliminating the effects of

differentaccounting methods.
Indicate the amount, timing and probability of future

cash flows.

Cash Flow Activities

Operating activities
Investing activities
Financing activities

O perating Activities
Operating activities include theproduction,salesand

delivery of the company's product as well as collecting

payment from its customers.
This could include purchasing raw materials, building

inventory, advertising, and shipping the product.

Investing Activities
Purchase or Sale of an asset (assets can be land,

building, equipment, marketable securities, etc.)

Loans made to suppliers or received from customers
Payments related to mergers and acquisition.

Financing Activities
It includes the inflow of cash frominvestorssuch

asbanksandshareholders, as well as the outflow of cash to

shareholders asdividendsas the company generates income.
Dividends paid
Sale or repurchase of the company's stock
Netborrowings
Payment of dividend tax
Repayment of debt principal, including capital leases

N otes to FinancialStatem ents

Also referred to as footnotes.
It provides additional information pertaining to a company's operations

and financialposition and are considered to be an integral part of the

financial statements.
Footnotes to thefinancial statementsreport the details and additional

information that are left out of the main reporting documents, such as
thebalance sheetandincome statement.
It is done mainly for the sake of clarity because these notes can be

quite long

Notes are also used to explain the accounting methods used to

prepare the statements and they support valuations for how particular
accounts have been computed.

Footnotes can include inform ation:

Debt
Accounts
Contingent liabilities /contextual information explaining

the financial numbers (e.g. to indicate a lawsuit).