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Cash flow statement
- 2. What is CASH? • Cash in hand • Demand deposits in bank • Cash equivalents short-term highly liquid investment readily convertible into cash
- 3. CASH FLOW STATEMENT • It reflects applications & sources of cash resources resulting in increase/ decrease in cash & cash equivalents.
- 6. Operating activities Deals with day to day *Inflows • Cash from sales • Cash received from debtors • Cash received from commission and fees • Royalty & other revenues business activities. *Outflows • Cash purchases • Payment to creditors • Payment of wages • Income tax • Cash operating expenses
- 7. Investing activities Acquisition and disposal of long-term * Inflows • Sale of fixed asset • Sale of investments • Interest received • Dividend received assets and other investments. * Outflows • Purchase of fixed assets • Purchase of investments
- 8. Financing activities Relate to changes in the composition of * Inflows • Issue of :shares debentures • Proceeds from borrowing: long term short term capital and debt of the company. * Outflows • Cash repayments for the amount borrowed • Interest paid on loan/debentures • Dividends paid on: equity & preference shares
- 9. Limitations of cash flow • It is very difficult to define the term ‘cash’. • Controversies over a number of items like cheques,stamps,postal orders,etc to be included in cash or not. • Prepaid and accruals recorded as increase in working capital would actually mislead to equate net income to cash flows.