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    Cash Flow Statement

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    Rojesh Basnet
    The cash flow statement explains changes in a company's cash position over a period of time. It summarizes cash receipts and payments during the period from three key activities: operating, investing, and financing. The statement is useful for management and investors in assessing the company's short-term liquidity and long-term solvency. It provides insights into the company's cash generating abilities and overall financial performance.

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    Cash Flow Statement

    Uploaded by

    Rojesh Basnet
    92 views8 pages
    The cash flow statement explains changes in a company's cash position over a period of time. It summarizes cash receipts and payments during the period from three key activities: operating, investing, and financing. The statement is useful for management and investors in assessing the company's short-term liquidity and long-term solvency. It provides insights into the company's cash generating abilities and overall financial performance.

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    Cash-flow-statement

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    The cash flow statement explains changes in a company's cash position over a period of time. It summarizes cash receipts and payments during the period from three key activities: operating, investing, and financing. The statement is useful for management and investors in assessing the company's short-term liquidity and long-term solvency. It provides insights into the company's cash generating abilities and overall financial performance.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    92 views8 pages

    Cash Flow Statement

    Uploaded by

    Rojesh Basnet
    The cash flow statement explains changes in a company's cash position over a period of time. It summarizes cash receipts and payments during the period from three key activities: operating, investing, and financing. The statement is useful for management and investors in assessing the company's short-term liquidity and long-term solvency. It provides insights into the company's cash generating abilities and overall financial performance.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 8

    Cash flow statement

     The statement of cash flows is a financial statement which explains


    the change in cash position from one balance sheet date to next
    balance sheet date.
     It is a statement which shows the inflows and outflows of cash and
    cash equivalents during the year.
     It is the summary of the cash receipts and payments over the period
    concerned.
     The statement is basically an analysis of the business’s cash
    movements for the period.
     It provides information in addition to those provided by the balance
    sheet and income statement.
     It is supplementary to the income statement and balance sheet in
    the sense that it uses information from these two statements to
    explain cash movements.
    Importance of cash flow statement

    • It is highly useful to management for assessing its ability to meet its short
    term obligations i.e. payment to creditors , payment of wages and salaries,
    payment of interest, taxes, and dividend etc.
    • It facilitates the management for implementing short term financial plan.
    • It helps the management in planning the repayment of loan, replacement
    of fixed assets and other long term financing.
    • It helps management for planning and coordinating financial operation
    properly.
    • It discloses the causes of variation in cash i.e. opening cash and closing
    cash for a particular period.
    • The cash expenditures can be controlled by comparing cash flow
    statement and cash budget for the same period.
    • It used for inter-firm and intra-firm comparison to identify of operation.
    Cont………

    • The mismanagement of cash can be properly analyzed and its recurrence


    can be avoided in the days to come.
    • Cash flow statement also helps the investors and shareholders know the
    financial position of an entity during the period.
    • It provides insights about the liquidity and solvency of a firm.
    • It shows the changes in the balance sheet and helps in analyzing the
    operating, investing and financing activities.
    • It helps the investors and shareholders providing information regarding
    cash generating abilities of an entity ( improving or deteriorating )
    • It reflects good or bad management of the firm
    • The banks and financial institutions can decide before lending loan
    facilities on seeing the cash flow statement
    Preparation of cash flow statement
    In cash flow statement, the business activities of an business organization
    can be classified into three parts. They are :
    a) Cash from operating activities
    b) Cash from investing activities
    c) Cash from financing activities
    a) Cash from operating activities : Those transactions which are considered in
    the determination of net income are known as operating activities. It
    involves the production , purchase and sales of goods and services to
    customers.
    b) Cash from investing activities: Investment activities are related to long term
    assets which are shown in the balance sheet. Investing activities are the
    acquisition and disposal of long term assets and other investment not
    included in cash equivalents.
    c) Cash from financing activities: Financing activities are related to the long
    term liabilities and shareholders equity.
    Methods of preparation of Cash flow statement
    1) Direct Method
    2) Indirect Method
    .
    .
    .
    .

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