• Cash Flow Statement

    The cash flow statement provides the cash inflow and outflow related information which is not available in the balance sheet and income statement. The cash flow statement is very much important in the following aspects

    • It provides the information about the cash inflow and outflow of the company during a period.
    • It provides the information about the operating, financing and investment activities of the company at the cash level.
    • It provides the liquidity information and solvency capability of the company.
    • It explains the change in cash which is specified in the balance sheet.

    There are three cash flow statements which are used to denote the cash flow activities of a company.

    Cash flow from operating activities (CFO) denotes the cash inflow and outflow generated form the regular operations of a company.

     Examples of Operating Cash Flow

    • Cash collected from debtors.
    • Cash paid to the creditors.
    • Cash collected from the sale of goods.
    • Cash used to pay interest.
    • Cash used to pay taxes
    • Cash used to pay other selling and administrative expenses.

    Cash flow from investing activities (CFI) denotes the cash inflow and outflow generated form the investment activities like buying and selling of fixed assets, land, other debt and equity of other companies and loan related activities.

    Examples of Investing Cash Flow

    • Cash received from the sale of fixed assets and land.
    • Cash paid to buy fixed assets and land.
    • Cash used to buy or sell other company’s debt and equity.
    • Cash used to repay outstanding loans
    • Cash used to buy Patent or Intelluctual property rights (IPRs).
    • Cash received from sale of internally developed patents and IPRs.

    Cash flow from financing activities (CFF) denotes the cash inflow and outflow generated from the finance related activities of the company include issuing new shares, buy back shares, issuing bonus shares etc.

    Examples of Financing Cash Flow

    • Cash received after issuing expernal debt or corporate bonds.
    • Cash used to retire corporate bonds.
    • Cash received after issuing shares.
    • Cash paid to buy back shares or issue bonus shares.
    • Cash used to pay dividends to the common and preference shareholders.

    One Sample Cash Flow Statement is shown below

    Cash Flow for 12 months

    Net Profit Before Tax

    4000

    Net Cash From Operating Activities

    2270

    Net Cash (used in)/from Investing Activities

    1675

    Net Cash (used in)/from Financing Activities

    -2100

    Net (decrease)/increase In Cash and Cash Equivalents

    1845

    Opening Cash & Cash Equivalents

    8650

    Closing Cash & Cash Equivalents

    10495

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