Just a preview of our modules in Master in International Business for Small and Medium Enterprises - MIBS. Contact us for more information. https://www.facebook.com/pages/Master-in-International-business-for-small-and-medium-enterprises-MIBS/173459502855793 http://www.economia.unipd.it/corsi/corsi-di-laurea-0/master/master-international-business-small-and-medium-enterprises-mibs

1. Master in International business for small and medium enterprises -MIBS
International Accounting
Michele Fabrizi
michele.fabrizi@unipd.it

2. Master in International business for small and medium enterprises -MIBS
Measuring and reporting cash flows

3. MIBS
Objectives
•Discuss the crucial importance of cash to a business
•Explain the nature of cash flow statement and discuss how it can be helpful in identifying cash flow problems
•Prepare a cash flow statement
•Interpret a cash flow statement

4. MIBS
Relationship between the balance sheet, profit and loss account and cash flow statement
Profit and loss account
Cash flow statement
Balance sheet
Balance sheet
Balance sheet
Profit and loss account
Cash flow statement

5. MIBS
State the increase, decrease or no effect on both cashand profitfor the following business events: 1. Repayment of a loan 2. Making a sale on credit3. Buying a fixed asset on credit4. Receiving cash from a trade debtor5. Depreciating a fixed asset6. Buying stock for cash7. Making a share issue for cash
Activity 6.2

6. MIBS
(what is) the cash flow statement
•Summary of the cash receipts and payments over the period concern
•All receipts and payments of a particular type are added together to give just one figure that appears in the statement
•The net total of the statement is the net increase or decrease of the cash of the business over the period
•The C/F statement is now accepted, along with P/L and B/S, as a primary financial statement

7. MIBS
The relationship between the balance sheet, the P and L account and the cash flow statement
Balance sheet at the startof the accounting period
Owner’s claim
Cash
Balance sheet at the endof the accounting period
Owner’s claim
Cash
Cash flow statement
Profit and loss account

8. MIBS
Standard layout ofthe cashflow statement

9. MIBS
Diagrammatical representation of the cash flow statement

10. MIBS
Deducing net cash (in)flows from operating activities
•The direct methodinvolves the analysis of the cash records of the business for the period, picking out all payments and receipts relating to operating activities. Not many businesses adopt this approach.
•The indirect methodderives the cash flow statement from profit and loss account and from balance sheet. It is the most popular method.

11. MIBS
Deducing net cash (in)flows from
operating activities
Cash From Sales = Sales - Δ trade receivables

12. MIBS
The indirect method of deducing the net cash flow form the operating activities
plus
plus or minus
equals
plus or minus
plus or minus
Net cash flow from operating activities
Net operating profit
Depreciation expense
Increase (minus) or decrease (plus) in stock
Increase (minus) or decrease (plus) in debtors
Increase (minus) or decrease (plus) in creditors
-(Dstock)
-(DTradereceivables)
+ (DTradePayables)

13. MIBS
The indirect method of deducing the net cash flow form the operating activities
plus
Net operating profit
Depreciation expense
Thesecostsare notmonetary! Theydo notimplya cash outflow!

14. MIBS
The indirect method of deducing the net cash flow form the operating activities
plus
Net operating profit
Depreciation expense
Assume thata new company buys1000€of rawmaterialsby cash and that, by the end of the year, ithassoldnothing.
Profit: 0 €
Δ Stock: +1000€
Cash: -1000€
plus or minus
Increase (minus) or decrease (plus) in stock
-(Dstock)

15. MIBS
The indirect method of deducing the net cash flow form the operating activities
plus
Net operating profit
Depreciation expense
plus or minus
Increase (minus) or decrease (plus) in stock
-(Dstock)
plus or minus
Increase (minus) or decrease (plus) in debtors
-(DTradereceivables)
Assume thata new company sellsgoodsfor 5000€on credit. No cash hasbeenreceivedyet.
Profit: +5000 €
Δ Tradereceivables: + 5000€
Cash: 0€

16. MIBS
The indirect method of deducing the net cash flow form the operating activities
plus
plus or minus
equals
plus or minus
plus or minus
Net cash flow from operating activities
Net operating profit
Depreciation expense
Increase (minus) or decrease (plus) in stock
Increase (minus) or decrease (plus) in debtors
Increase (minus) or decrease (plus) in creditors
-(Dstock)
-(DTradereceivables)
+ (DTradePayables)
Assume thata new company buysgoodsfor 4000€on credit. No cash hasbeenpaidyetbutgoodshasbeensold.
Profit: -4000 €
Δ TradePayables: + 4000€
Cash: 0€

17. MIBS
Dido Plc
31/12/2013
Net Operating Profit
122
Depreciation
34
1/1/2013
31/12/2013
Stock
15
17
TradeReceivables
24
21
TradePayables
18
19

18. MIBS
Dido’s Net cash flow from operating activities
Net operatingProfit
122
Add depreciation
+34
Less Increase in Stock
-2
AddDecreasein Receivables
+3
AddIncreasein Payables
+1
Net cash (in)flow from operating activities
158