Cash Flow Analysis

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Cash Flow Analysis

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Cash Flow Analysis

  1. 1. * The balance sheet provides information about an enterprise’s *assets and *how the assets have been financed by owned and borrowed funds at a point of time, *but it does not explain the changes during a period in assets, liabilities and equity resulting from the enterprise’s activities
  2. 2. *The profit and loss account provides information about an enterprise’s financial performance during a period, but because earnings are measured by accrual accounting , it does not show the cash generated through its operations.
  3. 3. * the cash flow statement reflects an enterprise’s major sources of cash receipts and cash payments.
  4. 4. Investors, analysts, creditors, managers and others will find the information in the cash flow statement helpful in assessing the following…. * The ability to generate positive future net cash flows. *The ability to meet its obligations, its ability to pay dividends and its needs for external financing. *The reasons for differences between net profit and associated cash receipts and payments. *The effect on the enterprise’s financial position of both its cash and non cash investing and financing transactions during the period.
  5. 5. The major activities of cashflow * The cash flow statement will reflect the cash flow effects of each of the major activities of the enterprise when the cash flows are classified according to whether they stem from * Operating Activities * Investment Activities * Financial Activities
  6. 6. Infow outflow Receipts from customers for sales of goods and services activities Payments to suppliers and employees for Materials and Services

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