Amity Business School

Amity Business School

MBA Class of 2010, Semester I
Accounting For Manager
Cash Flow Statement
By Santosh Kumar

1
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Cash and cash equivalent means

• Cash in hand
• Cash at bank
• Cash credit
• Treasury bills
• Commercial papers
• Short term marketable securities
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Thumb rule
Opening balance of cash and cash
equivalent + net changes in C and CE =
closing balance of C and CE
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C and CE
• It can flow from three activities
1. Operating
2. Investing
3. Financing
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Application of Cash flow

• Liquidity management
• Short term planning
• Management decision
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Cash flow activities

• Operating ……revenue producing
activities of the firm
• Investing………acquisition and disposal of
long term assets and other investments
• Financing……..size and composition of
owner’s capital
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• Inflow in operating activities

1. Cash sales
2. Cash received from debtors
3. Cash from commission , fees and
royalties
4. Cash from trading of financial
engineering products
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cont
5. Cash received from interest and dividend
for financial companies
6. Sale of securities in financial companies
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Outflow in operating activities

• Cash purchase
• Cash paid to creditors
• Cash operating expenses
• Wages and salaries
• Income tax
• Purchase of securities ( financial companies)
• Cash paid for interest (financial companies)
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Inflow in Investing Activities

• Sale of fixed asset/investments
• Interest received
• Dividend received
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Outflow in Investing activities

• Purchase in fixed asset/investments
• R&D
• Cash advances and loans made to 3rd
parties
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Inflow in financing activity

• Issue of shares/debentures in cash not in
consideration with other assets
• Proceeds from long term borrowing
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Outflow in Financing activities

• Payment of loans
• Redemption of shares
• Buyback of equity shares
• Payment of interest and dividend
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Significant cash flow

• Current account vs Cash and CE
Eg cash received from debtors
• Non current account vs Cash and CE
Eg purchase of goodwill
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