1. No more ratios, please!

2. Cash flow statem
Prepared by :
Jay
Raval
SUBMTED TO :Dr. B.C.Ajmera Sir

3. CONTENT
 Statement
of Cash Flows in
Perspective
 Meaning
 Classification
 Advantages

4. Statement of Cash Flows in
Perspective
 Why the statement of cash flows is needed in
addition to the balance sheet and the profit and
loss account?
 To provide relevant information about the cash
receipts and payments of an enterprise
 evaluate an enterprise’s
 liquidity
 financial flexibility
 profitability
 risk
 Provide feedback about previous assessments

5. MEANING

Cash – cash means all cash + cash equitable +
marketable securities + bank balance

Flow – flows means flow of cash from business to
economy and economy to business that is
cash inflows and cash outflows.

Statement – statement is a performance prescribed
by Chartered Accountant Act,1948
Thus, Cash Flow Statement is a statement of
inflows and outflows of cash and cash equivalents in
an enterprise during a specified period of time.

6. Continue…

A Cash Flow Statement summarizes the causes of
changes in cash position of a business enterprise
between dates of two balance sheets.

A statement a Cash Flow reveals the movements of
cash of a business enterprise for the given accounting
period indicating specifically how the cash was
generated.

Statement of Cash Flow is required for short range
financial planning.

7. CLASSIFICATION

1.
2.
3.
As per Accounting Standard-3, the changes
resulting in cash inflows and cash outflows
arise on account of three types of activities.
Operating activities
Investing activities
Financing activities

8. 1. CASH FLOW FROM
OPERATING ACTIVITIES

Operating Activities are the principle
revenue producing activities of the
enterprise and other activities that are
not investing and financing activities.

Hence, these are the results of those
transaction and events that determines
the net profit or loss.

9. Cash Flows from Operating
Activities
Payments to
Suppliers and
Employees
for Materials
and Services
Receipts from
Customers
for Sales of
Goods and
Services
Operating
Activities
Payments to
Governments
for Taxes and
Duties

10. Determining Net Cash Flow from
Operating Activities: Direct
Method
 Cash received from customers
 Cash paid to suppliers and employees
 Duties & taxes paid

11. 2. CASH FLOW FROM INVESTING
ACTIVITIES

Investing activities include the purchase
and disposal of long-term assets and
other investments not included in cash
equivalents.

The separate disclosure of Cash Flow
arising from investing activities is
important.

12. Cash Flows from Investing Activities
R eceip ts from
S ales of
Fixed A ssets
R eceip ts from
S ales of
In vestm en ts
an d from
C ollection s of
Loan s
R eceip ts from
In terest an d
D ivid en d s on
Loan s an d
In vestm en ts
P aym en ts for
P u rch ase of
Fixed A ssets
In vestin g
A ctivities
P aym en ts for
P u rch ases of
In vestm en ts
an d for
M ak in g of
Loan s

13. Determining Cash Flow from Investing
Activities
1. Plant and machinery
 purchase
 Disposal
2. Investments
 Purchases
 Sales
3. Interest received
4. Dividend received

14. 3. CASH FLOW FROM FINANCING
ACTIVITIES

The separate disclosure of Cash Flows
arising from financing activities is
important because it is useful in
predicting funds to the enterprise.

Financing Activities are activities that
result in changes in the size and
composition of the owner capital and
borrowings of the enterprise.

15. Cash Flows from Financing Activities
P aym en ts for
D ivid en d s on
S h are C ap ital
R eceip ts from
Issu an ce of
S h are C ap ital
R eceip ts from
Issu an ce of
D eb en tu res
R eceip ts from
O th er Lon gterm
B orrow in gs
Fin an cin g
A ctivities
P aym en ts for
P rin cip al on
D eb en tu res
an d O th er
B orrow in gs
P aym en ts for
In terest on
D eb en tu res
an d O th er
B orrow in gs

16. Determining Cash Flow from Financing
Activities
1. Equity share capital


Issuance
Buy-back
2. Dividends paid
3. Secured loan and unsecured loan


Issuance
Repayment and redemption
4.Interest paid

17. Advantages of Cash Flow Statement

Helpful in planning and co-ordination.

Helpful in control.

Useful in internal financial management.

Knowledge of change in cash position.

Helpful in short-term financial decisions.