Professional Documents
Culture Documents
21/04/2013
1.
1. 2. 3.
2.
3.
1. 2.
LGD Group
21/04/2013
LGD Group
21/04/2013
* Reflect the financial condition of the business * Represent cash receipts and payments for the period
LGD Group
21/04/2013
* Provide a summary of cash inflows and outflows * Help users understand how transactions affect
cash of business
the
* Based
on CFS, managers can make adjustments to operating, investing or financing activities business and its ability to pay the debts, especially in short term or dividends
LGD Group
21/04/2013
* Assessing the ability to generate cash * Allows users to compare the cash
internally and externally of a business
flows both
* Useful
in checking the accuracy of past assessments of future cash flows and in examining the relationship between profitability and net cash flow and the impact of changing prices.
LGD Group
21/04/2013
Operating
Investing
Financing
LGD Group
21/04/2013
LGD Group
21/04/2013
LGD Group
21/04/2013
LGD Group
10
21/04/2013
* The information is taken from accounting records * Produce the same result with indirect method. Only
the operating activities presentation is different.
LGD Group
11
21/04/2013
LGD Group
12
21/04/2013
LGD Group
13
21/04/2013
14
21/04/2013
$
5,000,000 505,000 (1,900,000) 3,605,000 (150,000) (350,000)
3,105,000
LGD Group
15
21/04/2013
Cash flows from financing activities Proceeds from issue of common stock Proceeds from issuance of long-term debt Dividends paid Net cash flows from financing activities 150,000 175,000 (45,000) 280,000
2,920,000
2,080,000 $5,000,000
21/04/2013
* There are more details than the cash flow statement * The net profit or loss for the period is adjusted * The items in statements are shown being added or
subtracted as following:
LGD Group
17
21/04/2013
Current Asset
Cash Current Asset Cash
Current Liabilities
Cash Current Liabilities Cash
LGD Group
18
21/04/2013
Interest paid
Income tax paid Net cash flows from operating activities
LGD Group
19
21/04/2013
LGD Group
20
21/04/2013
21
21/04/2013
$
3,500,000
(50,000)
(150,000) (350,000) 3,105,000 21/04/2013
$
(500,000) 35,000
(465,000)
Cash flows from financing activities Proceeds from issue of common stock Proceeds from issuance of long-term debt Dividends paid Net cash flows from financing activities 150,000 175,000 (45,000) 280,000
2,920,000
2,080,000 $5,000,000
21/04/2013
LGD Group
24
21/04/2013
LGD Group
25
21/04/2013
LGD Group
26
21/04/2013
* Advantages
* Provide the actual picture of the cash on hand * Better comparison of results of different companies * Satisfies the needs of the users better * Forecasting is easier * Can reduce tax for some periods when the cash is not
actually paid
* Disadvantages
* Misleading the real situation of the business in term of
revenue and expense
LGD Group
27
21/04/2013
* Advantages
* Match revenue and expense, provide a better
understanding for users of the current situation of business in term of profitability
* Disadvantages
* Cash tracking cannot be seen clearly * Company can have a lot revenue but short in cash * Too much on credit sales can result in irrecoverable
debts
LGD Group
28
21/04/2013
LGD Group
29
21/04/2013
LGD Group
Questions?
30
21/04/2013