25 cash flow statement
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CASH FLOWCASH FLOW
STATEMENTSTATEMENT
Dr. Jatin PancholiEmail: [email protected]
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 protected]. 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 protected]: 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 protected]. Visit website http://www.jatinpancholi.com. Those wishing to co-author next edition of this handout are requested to contact via email.