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  • 7/31/2019 Cash Flow Statement Presentation


  • 7/31/2019 Cash Flow Statement Presentation


    Cash-Flow statement may be defined as a summary

    of receipts and disbursements of cash for a particularperiod of time. It also explains reasons for the

    changes in cash position of the firm.

  • 7/31/2019 Cash Flow Statement Presentation


    There are two methods of calculating cashflow namely Direct method and Indirect

    method. SEBI (Securities Exchange Board ofIndia) Guidelines recommend for only directmethod.

  • 7/31/2019 Cash Flow Statement Presentation


    Helps the newly formed companies to know theirinflow and outflow of cash and thus prevent cashshortage

    Helps the investors judge whether the company isfinancially sound

    Cash flow statement records the inflow and outflowof cash over a period of time

  • 7/31/2019 Cash Flow Statement Presentation


    These statements will be highly helpful for planningand management of future financial commitments

  • 7/31/2019 Cash Flow Statement Presentation


    The Accounting period for the Cash Flow Statement is

    the same for which Profit and Loss Account and BalanceSheet are prepared.

    The Cash flow statement comprises of:

    (a) Cash flow from operating activities.(b)Cash flow from investing activities.(c) Cash flow from financing activities.

  • 7/31/2019 Cash Flow Statement Presentation


    Operating activities include revenue producing activities whichare not investing and financing activities.

    Investing activities are those that deal with purchases and sales

    of non-current assets .

    Financing activities are those associated with financing the firm.

    Extraordinary Items : The Cash flow associated with extraordinary items should be classified as arising from operating,investing financing activities. For example, the amount receivedfrom Insurance Company on account of Loss of Stock or loss fromearthquake should be reported as cash flow from operatingactivities.

  • 7/31/2019 Cash Flow Statement Presentation


    There is some scope for manipulation of cash flows. Forexample, a business may delay paying suppliers until afterthe year-end, or it may structure transactions so that thecash balance is favorably affected.

    There are controversies over a number of items likecheques, stamps, postal orders etc. to be included in cash ornot.

    Cash flow statements just as the Income Statement andBalance Sheet are prepared using historical informationwhich is in the past. It therefore does not provide complete

    information to assess the future cash flows of an entity.

  • 7/31/2019 Cash Flow Statement Presentation


    Cash flow statement aims at highlighting the cash generated fromoperating activities.

    Cash flow statement helps in planning the repayment of loanschedule and replacement of fixed assets, etc.

    Cash flow statement is the centre of all financial decisions. It isused as the basis for the projection of future investing and financing

    plans of the enterprise.

    Cash flow statement helps to ascertain the liquid position of thefirm in a better manner. Banks and financial institutions mostly

    prefer cash flow statement to analyse liquidity of the borrowing firm.

  • 7/31/2019 Cash Flow Statement Presentation


    Cash flow Statement helps in efficient and effectivemanagement of cash.

    The management generally looks into cash flow statements tounderstand the internally generated cash which is best utilisedfor payment of dividends. Cash Flow Statement based on AS-3(revised) presents separately cash generated and used in

    operating, investing and financing activities.

    It is very useful in the evaluation of cash position of a firm.

  • 7/31/2019 Cash Flow Statement Presentation


    The statement of cash flow shows three main categories ofcash inflows and cash outflows, namely : operating, investingand financing activities.

    The cash flow statement is divided into three sections:

    Cash flow from operating activities: Shows the results ofcash inflows and outflows related to the fundamental

    operations of the basic line or lines of business in which thecompany engages. (Example: cash receipts from the sale ofgoods or services and cash outflows for purchasing inventoryand paying rent and taxes.)

  • 7/31/2019 Cash Flow Statement Presentation


  • 7/31/2019 Cash Flow Statement Presentation


    Cash flow from investing activities: associated with purchasesand sales of non-current assets (Example: building and equipmentpurchases or sales of investments or subsidiaries.)

  • 7/31/2019 Cash Flow Statement Presentation


    Cash flow from financing activities: associated with financingthe firm (Example: selling and paying off bonds and issuing stockand paying dividends)

  • 7/31/2019 Cash Flow Statement Presentation


    Direct methodFormat for Cash flow Statement for the year ended ...............As per Accounting Standard-3 (Revised)Particulars Rs Rs(i) Cash flow from operating activitiesA. Operating cash receipts

    Cash sales xxx

    Cash received from customers xxxTrading commission received xxx Royalties received xxx xxxB. Less : Operating cash paymentCash purchase xxx

    Cash paid to the supplier xxx

    Cash paid for business expenses like xxx xxxoffice expenses, Manufacturing expenses,selling and distribution expensesC. Cash generated from operations ( A B) xxxD. Less Income tax paid (Net of tax refund received) xxxE. Cash flow before extraordinary items xxx

  • 7/31/2019 Cash Flow Statement Presentation


    F. Adjusted extraordinary items (+/)/Receipt/payment xxxG. Net cash flow from (or used in) operating activities xxx(ii) Cash flow from investing activitiesH. Cash inflows from investing activities Proceeds from the sale of fixed assets xxx

    Proceeds from sale of investments xxx Proceeds from sale of intangible assets xxx Interest and dividend received. xxxI. Cash Outflows from investing activities Purchase of fixed assets xxx Purchase of investment xxx

    Purchase of investment xxx

    Purchase of intangible assets like goodwill.J. Net cash flow from investing activities ( H I) xxx

  • 7/31/2019 Cash Flow Statement Presentation


    (iii) Cash flow from financing activitiesK. Cash inflows from financing activities Proceeds from issue of shares and debentures xxx Proceeds from other long term borrowings xxxL. Cash outflows from financing activities

    Dividend paid xxx Interim dividend paid xxx Interest on debentures and loans paid xxx Repayment of loans xxx Redemption of debentures xxxM. Net cash flow from financing activities xxx

    N. Net increase/decrease in cash and cash equivalents (G+J+M) xxx(v) Add cash and cash equivalent in the beginning of the year xxxCash in handCash at bank Short term deposit Marketable securities

    (vi) cash and cash equivalent at the end of the year (N

    (v)) xxx