Cash Flow Statement

Learning Outcome
• Recognise the importance and relevance of cash Flow Statement in taking
decisions
• Does the Ending Balance of a Cash-Flow Statement
Always Equal the Cash?
• Cash is king, and it should always balance.
Balance Sheet - Where does
business stand today

Income Statement – How

well business did this year

Cash Flow Statement –

From where did cash came and where
did it go
Cash Includes-
Meaning of Cash Flow
 Relationship with BS and IS
Income statement

BS at start Cash flow BS at end

A cash flow statement reflects both “profit related” and

“non-profit related” activities (investing and financing) with
an impact on available cash over the period covered in the
income statement
 Objectives of preparing Cash
Flow Statement
• Cash flow statement shows inflow and outflow of cash and cash equivalents from various
activities of a company during a specific period under the main heads i.e., operating
activities, investing activities and financing activities.

• Information through the Cash Flow statement is useful in assessing the ability of any
enterprise to generate cash and cash equivalents and the needs of the enterprise to utilize
those cash flows.

• Taking economic decisions requires an evaluation of the ability of an enterprise to

generate cash and cash equivalents, which is provided by the cash flow statement
Types of cash Flow
1. Operational activities (OA):
Activities that are directly related to the daily core business
operations are called operational activities.
• Operating activities include:
• Receipts for the sale of loans, debt or equity instruments in a
trading portfolio
• Interest received on loans
• Payments to suppliers for goods and services
• Payments to employees or on behalf of employees
• Interest payments (alternatively, this can be reported under
financing activities in IAS 7)
• buying Merchandise
2.Investing activities (IA)
Activities pertaining to investments that the company
makes with an intention of reaping benefits at a later
stage.
• Investing activities include:
• 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.
•
3.Financing activities (FA)
Activities pertaining to all financial transactions of the
company.
• Financing activities include:
• Dividends paid
• Sale or repurchase of the company’s stock
• Net borrowings
• Repayment of debt principal, including capital leases
Format