Cash Flow Statement

Presented By:
Ahsan Arif
Umer Javaid
Cash Flow Statement
The Cash Flow Statement provides information about:
•Cash Receipts(Cash inflow)
•Use of Cash (Cash Outflow)

During a period of time Inflows and Outflows are reported for:-

•Operating Activities
•Investing Activities
•Financing Activities
Where From - Where to

Cash Come From Cash Recourse Cash Goes to

IN OUT
1.Profits 1.Losses
2.Sales of fixed IN OUT
2.Purchase Of Fixed
Assets Assets
3.Decrease in stock IN OUT 3.Increase in stock
4.Decrease in debtors
4.Increase in debtors
5.Capital Introduced IN OUT
5.Dividends
6.Loans Received IN OUT
6.Loan Repaid
7.Increase In IN OUT
creditors 7.Decrease in Creditors
IN OUT
Operating Activities

It includes Receiving cash from customers for the sales of goods and services, receiving
interest and dividends on loans and investments, and making cash payment for wages , goods
and services purchased, interest, and taxes.

Operating Activities

Cash inflow Cash outflow

1)Cash sales 1) Cash Purchases
2)Received from debtor 2) Payment to Creditors
3)Commission & Fees 3) Cash Operating Expense
4)Royalty 4) Payment of Wages
5) Income Tax
6) Manufacturing Expense
Cash effects the transaction on net incomes
Operating Activities

In operating activities there are tow methods

1. Direct Method
2. Indirect Method

Companies Favor the indirect methos for two reasons

Indirect Method
1.It is easier and less costly to prepare
2.It is focuses on the difference between net income and net
cash flow
Form operating activities.
Direct Method
•The statement of cash flows direct method uses actual
cash inflows and outflows from the company's operations,
instead of modifying the operating section from accrual
accounting to a cash basis.
•Direct Method use only 1.2 Percent
•And
•Indirect method use 98.8 Percent
Investing activities

It includes purchasing and selling long-term assets and marketable securities (other than
cash equivalents)as well as making and collecting on loans.

Investing Activities

Cash inflow Cash Outflow

1)Sales and fixed assets 1) Purchase of fixed Assets
2)Sales of investment 2) Purchase of investments
3)Interest received 3) Working Capital
4)Dividends received
5)Working capital Recovery
Financing Activity

It includes issuing and buying back capital stock as well as borrowing and repaying loans on a
short – or – long – term basis (issuing bonds and notes). Dividends paid are also include in this
category.

Financing Activities

Cash inflow Cash outflow

1)Issues of share in Cash 1) Payment of loans
2)Proceed from long term 2) Interest paid
Borrowings. 3) Payment of Dividends
4) Lease Liability
Preparing a Statement of cash flow

• Use net operating income as the starting point to get net operating cash
flow
• Add back any non-cash expense
(Example- Depreciation)

Net Cash Flow = Cash inflow – Cash outflow

Net Operating Cash Flow= Income after taxes + Depreciation