25 Cash Flow Statement

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<ul><li><p>8/6/2019 25 Cash Flow Statement</p><p> 1/12</p><p>1</p><p>CASH FLOWCASH FLOW</p><p>STATEMENTSTATEMENT</p><p>Dr. Jatin PancholiEmail: email@jatinpancholi.com</p><p>Website: http://www.jatinpancholi.com</p><p>Dr. Jatin Pancholi has compiled and prepared this teaching note from various sources, as the basis for class discussion rather</p><p>than to illustrate either effective or ineffective handling of a management situation. The handling of a management situation</p><p>requires personal guidance by a professional. To obtain copies, request permission to reproduce and to send feedback,please send email to email@jatinpancholi.com. Visit website http://www.jatinpancholi.com. Those wishing to co-author next</p><p>edition of this handout are requested to contact via email.</p><p>Perfection does not exist. To understand this is the</p><p>triumph of human intelligence; to expect to possess it is</p><p>the most dangerous kind of madness. - Alfred de</p><p>Musset</p></li><li><p>8/6/2019 25 Cash Flow Statement</p><p> 2/12</p><p>2</p><p>CASH FLOW STATEMENT</p><p> CF Statement is a flow statement.</p><p> CFS indicates changes that took place</p><p>between tow successive BalanceSheets.</p><p> The statement of cash flows provides</p><p>a thorough explanation of the changesthat occurred in a firms cash balance</p><p>during the entire accounting period.</p></li><li><p>8/6/2019 25 Cash Flow Statement</p><p> 3/12</p><p>3</p><p>CFS The statement of cash flows reports</p><p>cash receipts and payments of a</p><p>company during a given period foroperating, financing, and investing</p><p>activities.</p><p> Cash includes cash and cashequivalents.</p></li><li><p>8/6/2019 25 Cash Flow Statement</p><p> 4/12</p><p>4</p><p>WhyC</p><p>FS? Balance Sheet P&amp;L A/c insufficient.</p><p> It shows the relationship of net income to</p><p>changes in cash balances. It reports past cash flows as an aid to:</p><p> Predicting future cash flows</p><p> Evaluating the way management generates and</p><p>uses cash Determining a companys ability to pay interest</p><p>and dividends and to pay debts when they aredue</p><p> It identifies changes in the mix of productiveassets.</p></li><li><p>8/6/2019 25 Cash Flow Statement</p><p> 5/12</p><p>5</p><p>WhyC</p><p>FS? . . . The statement of cash flows, along</p><p>with the income statement,explains why balance sheet items</p><p>have changed during the period.</p><p>Legal rules.</p></li><li><p>8/6/2019 25 Cash Flow Statement</p><p> 6/12</p><p>6</p><p>WhyC</p><p>FS? The relationship among the balance sheet,</p><p>income statement, and statement of cash</p><p>flows:Balance Sheet</p><p>December 31,</p><p>19X1</p><p>Balance Sheet</p><p>December 31,</p><p>19X0</p><p>Income Statement</p><p>Statement of Cash Flows</p></li><li><p>8/6/2019 25 Cash Flow Statement</p><p> 7/12</p><p>7</p><p>Activities AffectingC</p><p>ash Operating activities - transactions</p><p>that affect the income statement</p><p>Investing activities - activities thatinvolve (1) providing and</p><p>collecting cash as a lender or as</p><p>an owner of securities and (2)</p><p>acquiring and disposing of plant,</p><p>property, equipment, and other</p><p>long-term productive assets</p></li><li><p>8/6/2019 25 Cash Flow Statement</p><p> 8/12</p><p>8</p><p>Activities AffectingC</p><p>ash . . . Financing activities - activities that</p><p>include obtaining resources as a</p><p>borrower or issuer of securities and</p><p>repaying creditors and owners</p></li><li><p>8/6/2019 25 Cash Flow Statement</p><p> 9/12</p><p>9</p><p>Operating Activities</p><p>Cash inflows</p><p> Cash Receipts fromsale of goods/renderingof services</p><p> Cash Received fromroyalties, fees,commission, etc.</p><p> Other operating</p><p>receipts</p><p>Cash outflows</p><p> Cash payments tosuppliers forGoods/services</p><p> Cash payments toemployees</p><p> Interest and taxes paid</p><p> Other operating cash</p><p>payments</p></li><li><p>8/6/2019 25 Cash Flow Statement</p><p> 10/12</p><p>10</p><p>Investing Activities</p><p>Cash inflows</p><p> Sale of property, plant,</p><p>and equipment</p><p> Sale of securities thatare not cash</p><p>equivalents</p><p> Receipt of loan</p><p>repayments</p><p>Cash outflows</p><p> Purchase of property, plant</p><p>equipment</p><p> Purchase of securities that</p><p>are not cash equivalents</p><p> Making loans</p></li><li><p>8/6/2019 25 Cash Flow Statement</p><p> 11/12</p><p>11</p><p>Financing Activities</p><p>Cash inflows</p><p> Borrowing cash from</p><p>creditors</p><p> Issuing equity shares</p><p> Issuing debt securities</p><p>Cash outflows</p><p> Repayment of amounts</p><p>borrowed</p><p> Repurchase of equity</p><p>shares</p><p> Payment of dividends***</p></li><li><p>8/6/2019 25 Cash Flow Statement</p><p> 12/12</p><p>12</p><p>Thank You</p><p>Happiness is a positive cash flow.(Fred Adler - Venture capitalist)</p><p>Dr. Jatin Pancholi</p><p>Email: email@jatinpancholi.comWebsite: http://www.jatinpancholi.com</p><p>Dr. Jatin Pancholi has compiled and prepared this teaching note from various sources, as the basis for class discussionrather than to illustrate either effective or ineffective handling of a management situation. The handling of a management</p><p>situation requires personal guidance by a professional. To obtain copies, request permission to reproduce and to send</p><p>feedback, please send email to email@jatinpancholi.com. Visit website http://www.jatinpancholi.com. Those wishing to co-author next edition of this handout are requested to contact via email.</p></li></ul>