Basically it’s a documentary presentation which checks inflow and outflow of cash and cash equivalents. A cash flow statement is a financial statement that provides aggregate data regarding all cash inflows that a company receives from its ongoing operations and external investment sources.

1. Cash Flow Statement
Basically it’s a documentary presentation which checks inflow and
outflow of cash and cash equivalents.
A cash flow statement is a financial statement that provides aggregate
data regarding all cash inflows that a company receives from its
ongoing operations and external investment sources.

2. Cash and Cash
Equivalents
It refers to the line item on the value on the balance sheet that
reports the value of a company’s assets that are cash or can be
converted into cash.

3. Cash and Cash Equivalent includes:
• Cash
• Bank Balance
• Cheque, Drafts
• Current investment- investments which by their nature are readily realizable and are
intended to be held for less than one year from the date when such investments
done.
• Marketable Securities- investments that easily be bought, sold, or traded on public
exchanges for example, stocks, bonds, preferred shares, commercial paper, treasury
bills etc.

4. Classification of cash flow statement
• Operating activity
• Investing activity
• Financing activity

5. Financing Activity
This activity in cash flow statement focuses on how a firm raises
capital and pays it back to investors through capital markets.
Basically, net cash provided by(required to) debenture holders and
equity shareholders is financing activity.

6. Financing activity includes
(Share Capital or loans)
Inflow of cash-
Issue of shares in cash
Issue of debentures in cash
Proceeds from long-term borrowings
Outflow of cash-
Payments of dividends and loans
Redemption of debt and preference
shares
Interest paid
Payment of buy-back of shares
Income tax(if identified with financing
activities)

7. Investing Activity
This activity of cash flow statement refers to the purchase and sale of
long-term assets and other business investments, within a specific
reporting period.
Basically, it displays how much money has been used in(generated
from) making investments during a specific time period.

8. Investing activity includes
(Fixed assets and non-current investments)
Inflow of cash-
Sale of investments
Sale of fixed assets
Interest received
Dividend received
Outflow of cash-
Purchase of asset
Purchase of non-current investment
Income tax paid(if identified with
investing activity)

9. Operating Activity
This activity in cash flow refers to all the things a company does
to bring its products and services to market ongoing basis.
Basically, this business activity is directly related to providing its
good and services to the market.

10. Inflow of cash-( in case of non-
financial enterprises)
Cash sales
Cash received from royalty,
commission
Cash received from BR, debtors, trade
receivables
Outflow of cash-(in case of non-
financial enterprise)
Interest, dividend income
Gain on sale of fixed assets
Operating activity includes
(Normal business operation)

11. Operating activity includes
Inflow of cash(in case of financial
enterprise)
Receipt from interest and commission
Dividend received
Receipts from sale of securities
Outflow of cash(in case of financial
enterprise)
Interest and loan paid
Payment to employees
Payment for purchase of securities

12. Calculation of operating profit before working
capital changes
Add:
Decrease in-
Current assets, inventories, trade receivables, prepaid expenses, accrued income,
Increase in-
Trade payables, outstanding expenses, income received in advance
Less:
Increase in current assets and decrease in current liabilities

16. Mr. Raj joined a multinational credit rating company immediately after his graduation from a university college.
After joining the organization, he had an induction programme on financial statements analysis for 30 days. He
was very inquisitive to learn and he could upgrade his skills of financial statements analysis about credit rating.
After completion of his induction he was posted in corporate credit rating. Then, he was asked to analyse
financial statements of A company limited and B company limited. He took three days to collect the data and
apply techniques of financial statements analysis in these two companies. He also compared the analysis of
these two companies with comparable companies from the industry under different scenarios of economic
conditions.
After three days, he prepared his power point presentation to a group of senior managers for their comments
and approval. The focus of Mr. Raj’s analysis was based on balance sheet, income statement and accounting
policies adopted by the companies. The presentation was not substantive and it was satisfactory. The senior
managers felt that he should also use cash flow statement for analysis and come back with new presentation
on next day.
Subsequently, Mr. Raj recalled what he studied about cash flow topic in accounting class. He remembered the
cash flow statement is a one of the useful statements for analysis along with balance sheet and income
statement. This statement presents cash in flow and cash out flow classified under three categories such as
cash from Operating activities, cash from investing activities and cash from financing activities.

17. Cash from Operations represents the cash inflow and outflows generated out of core
business activities of the organization. Cash sales and collection from the clients are the
examples of cash flows from Operations. Cash outflows are related to payment to
employees, vendors, tax authorities and other required for day to day operations are the
examples of cash flows from Operations. Indian accounting standards allowes the entity
to report the cash flows from operating activities using either the direct or indirect
method. The company is free to select the suitable method.
Cash flow from investing activities consists of cash inflows and outflows related to
purchase/sale of non-current assets and non-current investment. Payment for purchase
of property, plant equipments, acquisition of Patents are some examples of Cash
Outflow of investing activity. Collection of cash of sale on property, plant equipments
and other investments are the examples of cash inflow of investing activity.
Cash flow from financing activities consists of cash inflows and cash outflows related to
long term and short term source of financing. Issue of equity shares and issue of bonds,
borrowing from bank are some examples of cash inflow of financing activity.
Redemption of loan, repayment of borrowing, payment of shares buyback, payment on
interest of interest on borrowed capital are some examples of cash outflow of investing
activity.

18. Analysis of cash flows statement is a big challenge to Mr. Raj
because much of his understanding of the tools and techniques
are confined to the analysis of balance sheet and income
statement. He was wondering how to start the analysis of cash
flow statements. He is contemplating on some of the questions like
why cash flow statement, how it is different from other two
financial statements like Balance sheet and Profit and loss
statement and this statement and how to interpret the same. He
was thinking what additional analysis can be made based on Cash
flow statements to substantiate his earlier analysis. The senior
manager’s dissatisfaction is roaming in his head.

19. Presentation
Submitted by- Kashish
Program- BBA+MBA(INTEGRATED)
Roll no. 2202520003
Course- Analyzing cost for managerial decision making
Course code- SMMC501A
Credit- 5
Teacher- Neha Kamboj