25 cash flow statement

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    CASH FLOWCASH FLOW

    STATEMENTSTATEMENT

    Dr. Jatin PancholiEmail: email@jatinpancholi.com

    Website: http://www.jatinpancholi.com

    Dr. Jatin Pancholi has compiled and prepared this teaching note from various sources, as the basis for class discussion rather

    than to illustrate either effective or ineffective handling of a management situation. The handling of a management situation

    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

    edition of this handout are requested to contact via email.

    Perfection does not exist. To understand this is the

    triumph of human intelligence; to expect to possess it is

    the most dangerous kind of madness. - Alfred de

    Musset

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    CASH FLOW STATEMENT

    CF Statement is a flow statement.

    CFS indicates changes that took place

    between tow successive BalanceSheets.

    The statement of cash flows provides

    a thorough explanation of the changesthat occurred in a firms cash balance

    during the entire accounting period.

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    CFS The statement of cash flows reports

    cash receipts and payments of a

    company during a given period foroperating, financing, and investing

    activities.

    Cash includes cash and cashequivalents.

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    WhyC

    FS? Balance Sheet P&L A/c insufficient.

    It shows the relationship of net income to

    changes in cash balances. It reports past cash flows as an aid to:

    Predicting future cash flows

    Evaluating the way management generates and

    uses cash Determining a companys ability to pay interest

    and dividends and to pay debts when they aredue

    It identifies changes in the mix of productiveassets.

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    WhyC

    FS? . . . The statement of cash flows, along

    with the income statement,explains why balance sheet items

    have changed during the period.

    Legal rules.

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    WhyC

    FS? The relationship among the balance sheet,

    income statement, and statement of cash

    flows:Balance Sheet

    December 31,

    19X1

    Balance Sheet

    December 31,

    19X0

    Income Statement

    Statement of Cash Flows

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    Activities AffectingC

    ash Operating activities - transactions

    that affect the income statement

    Investing activities - activities thatinvolve (1) providing and

    collecting cash as a lender or as

    an owner of securities and (2)

    acquiring and disposing of plant,

    property, equipment, and other

    long-term productive assets

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    Activities AffectingC

    ash . . . Financing activities - activities that

    include obtaining resources as a

    borrower or issuer of securities and

    repaying creditors and owners

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    Operating Activities

    Cash inflows

    Cash Receipts fromsale of goods/renderingof services

    Cash Received fromroyalties, fees,commission, etc.

    Other operating

    receipts

    Cash outflows

    Cash payments tosuppliers forGoods/services

    Cash payments toemployees

    Interest and taxes paid

    Other operating cash

    payments

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    Investing Activities

    Cash inflows

    Sale of property, plant,

    and equipment

    Sale of securities thatare not cash

    equivalents

    Receipt of loan

    repayments

    Cash outflows

    Purchase of property, plant

    equipment

    Purchase of securities that

    are not cash equivalents

    Making loans

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    Financing Activities

    Cash inflows

    Borrowing cash from

    creditors

    Issuing equity shares

    Issuing debt securities

    Cash outflows

    Repayment of amounts

    borrowed

    Repurchase of equity

    shares

    Payment of dividends***

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    Thank You

    Happiness is a positive cash flow.(Fred Adler - Venture capitalist)

    Dr. Jatin Pancholi

    Email: email@jatinpancholi.comWebsite: http://www.jatinpancholi.com

    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

    situation 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 edition of this handout are requested to contact via email.