CASH FLOW STATEMENT

A cash flow statement is a financial statement that provides

aggregate data regarding all cash inflows that a company receives
from its ongoing operations and external investment sources. It also
includes all cash outflows that pay for business activities and
investments during a given period.

The cash flow statement is believed to be the most intuitive of all the
financial statements because it follows the cash made by the
business in three main ways: through operations, investment, and
financing. The sum of these three segments is called net cash flow.
KEY TAKEAWAYS
•A cash flow statement provides data regarding all cash inflows that a
company receives from its ongoing operations and external investment
sources.
•The cash flow statement includes cash made by the business through
operations, investment, and financing—the sum of which is called net
cash flow.
•The first section of the cash flow statement is cash flow from
operations, which includes transactions from all operational business
activities.
•Cash flow from investment is the second section of the cash flow
statement, and is the result of investment gains and losses.
•Cash flow from financing is the final section, which provides an
overview of cash used from debt and equity.
TYPES OF ACTIVITIES
• OPERATING ACTIVITIES

• INVESTING ACTIVITIES

• FINANCING ACTIVITIES
 TYPES OF ACTIVITIES
1. Cash Flows from Operating activities:
• The first section of the cash flow statement covers cash flows from
operating activities (CFO) and includes transactions from all operational
business activities. The cash flows from operations section begins with
net income, then reconciles all non-cash items to cash items
involving operational activities.
• For example, accounts receivable is a non-cash account. If accounts
receivable go up during a period, it means sales are up, but no cash was
received at the time of sale. The cash flow statement deducts receivables
from net income because it is not cash. The cash flows from the
operations section can also include accounts payable, depreciation,
amortization, and numerous prepaid items booked as revenue or expenses,
but with no associated cash flow.
2.Cash Flows from Investing:
• This is the second section of the cash flow statement. It looks at cash
flows from investing (CFI) and is the result of investment gains and
losses. This section also includes cash spent on property, plants, and
equipment. This section is where analysts look to find changes
in capital expenditures (CapEx).
• When CapEx increases, it generally means there is a reduction in cash
flow. But that’s not always a bad thing, as it may indicate that a
company is making investment into its future operations. Companies
with high CapEx tend to be those that are growing.
• While positive cash flows within this section can be considered good,
investors would prefer companies that generate cash flow from business
operations—not through investing and financing activities. Companies
can generate cash flow within this section by selling equipment or
property.
3. Cash Flows from Financing:
• Cash flows from financing (CFF) is the last section of the cash flow
statement. The section provides an overview of cash used in business
financing. It measures cash flow between a company and its owners and its
creditors, and its source is normally from debt or equity. These figures are
generally reported annually on a company’s 10-K report to shareholders.
• Analysts use the cash flows from financing section to determine how much
money the company has paid out via dividends or share buybacks. It is also
useful to help determine how a company raises cash for operational growth.
Cash obtained or paid back from capital fundraising efforts, such as equity or
debt is listed here, as are loans taken out or paid back.
• When the cash flow from financing is a positive number, it means there is
more money coming into the company than flowing out. When the number is
negative, it may mean the company is paying off debt or is making dividend
payments and/or stock buybacks.
FORMAT OF
CASH FLOW
STATEMENT
Key Differences between fund flow statement and cash
flow statement
• The fund flow statement is the earlier version of the cash flow statement. The cash flow
statement is more comprehensive and details the multiple cash flows of a company,
rather than just focusing on working capital.

• The cash flow statement is best used to understand the liquidity position of a firm
whereas the fund flow statement is best suited for long-term financial planning, which is
why it is an important tool for investors.

• The fund flow statement is able to identify the sources of cash and their uses, and the
cash flow statement starts with looking at the current level of cash and how it leads to
the closing balance of cash.

• Opening and closing balance of cash are not shown in fund flow statement while
opening and closing balance of cash are shown in cash flow statement.

• Fund flow statement is prepared on ‘accrual basis’ while cash floe statement is prepared
on ‘cash basis.
The main objectives of a cash flow
statement are to:
• Provide information on the cash inflows and outflows of a
company over a specified period of time, usually a quarter or
year.

• Show the company's ability to generate positive cash flow

from operating, investing and financing activities.

• Provide a basis for forecasting future cash flows.

• Enable users to evaluate a company's liquidity and solvency.

• Provide additional information to the income statement and

balance sheet
to help users assess a company's financial health.
The limitations of a cash flow statement
include:
• It only reports on cash transactions and not non-cash
transactions, such as depreciation, which can be significant
in some industries.

• It may not provide an accurate picture of a company's

financial health if there are significant differences between
accrual accounting and cash transactions.

• It can be difficult to compare cash flow statements

between companies, especially if they use different
accounting methods.

• It can be affected by seasonal and one-time transactions,

making it challenging to make accurate forecasts.
THANK YOU