The document discusses key aspects of a statement of cash flows including: what it reveals about a company's ability to pay debts and need for external financing; the difference between net income and net cash flow; and the effect of cash and non-cash transactions. It also outlines the principal activities of operating, investing, and financing cash flows and how current assets/liabilities changes are handled.

1. Urooj Sheikh
Umaima Siqqidui
Farah Ahmed
Sahrish Darjat

2.  A company’s ability to generate future net
cash inflows from operations to pay debts,
interest and dividend.
 A company’s need for external financing.
 The reasons for differences between net
income and net cash flow from operating
activities.
 The effect of cash and non cash investing and
financing transactions.

3.  A statement of cash flows is an important
document that investors keep a close eye on.
 The report draws its significance from the
fact that it provides data about a firm's
solvency --- that is, its ability to pay debts.
 To investors and financial-market players, it's
important that corporate management shows
that the company doesn't put all its eggs in
one basket --- in other words, corporate
business lines diversify their investments in
various economic sectors.

4.  These are the principal revenue producing
activities such as sales and purchases of
goods and services
 These are activities usually deal with current
assets and current liabilities
 Income tax paid is the operating activity

5.  These activities deal with sales and purchases
of fixed assets and other long term
investments
 Dividend and Interest received on investment
are the investing activities because they are
the return on investment

6.  These activities deal with shareholder’s
(owner’s) equity and long term liabilities

 Dividend and interest paid is the financing
activity because they are costs of obtaining
financial resources.

7.  The main difference between the direct
method and the indirect method involves the
cash flows from operating activities, the first
section of the statement of cash flows. (There
is no difference in the cash flows reported in
the investing and financing activities
sections.)
 Under the direct method, the cash flows from
operating activities will include the amounts
for such as cash from customers and cash
paid to suppliers.

8.  Operating Activities:
 Current Assets Increase Cash outflow
 Current Assets Decrease Cash Inflow
 Current Liabilities Increase Cash Inflow
 Current Liabilities Decrease Cash Outflow

9.  Investing Activities:
 Fixed Assets Increase Cash Outflow
 Fixed Assets Decrease Cash Inflow
 Financing Activities:
 Long term liabilities increase Cash Inflow
 Long Term liabilities decrease Cash Outflow
 Share Capital Increase Cash Inflow
 Share Capital Decrease Cash Outflow

10.  Current assets and liabilities changes – other
than cash.
 We calculate :
1. Net Income
2. Non- Cash Items
3. Other Income – Extra ordinary
4. Current Assets and Liabilities