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  • 4.cash Flow Statement (CFS)

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    Efrelyn Grethel Baraya Alejandro
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    The cash flow statement provides an analysis of cash inflows and outflows from operating, investing, and financing activities. It shows only cash transactions, unlike the income statement which follows accrual accounting. The statement has three main sections - cash from operating activities, investing activities, and financing activities. Operating activities reflect cash generated from business operations like sales, expenses, and interest payments. The cash flow statement is an important financial statement that shows a company's liquidity and ability to pay debts over time.

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    4.Cash Flow Statement (CFS)

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    The cash flow statement provides an analysis of cash inflows and outflows from operating, investing, and financing activities. It shows only cash transactions, unlike the income statement which follows accrual accounting. The statement has three main sections - cash from operating activities, investing activities, and financing activities. Operating activities reflect cash generated from business operations like sales, expenses, and interest payments. The cash flow statement is an important financial statement that shows a company's liquidity and ability to pay debts over time.

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    111 views16 pages

    4.cash Flow Statement (CFS)

    Uploaded by

    Efrelyn Grethel Baraya Alejandro
    The cash flow statement provides an analysis of cash inflows and outflows from operating, investing, and financing activities. It shows only cash transactions, unlike the income statement which follows accrual accounting. The statement has three main sections - cash from operating activities, investing activities, and financing activities. Operating activities reflect cash generated from business operations like sales, expenses, and interest payments. The cash flow statement is an important financial statement that shows a company's liquidity and ability to pay debts over time.

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    of 16

    Cash Flow

    Statement (CFS)
    Key terms
    1.Cash Flow Statement
    2.Direct Approach
    3.Indirect Approach
    4.Operating Activities
    5.Investing Activities
    6.Financing Activities
    CASH FLOW STATEMENT

    Provides an analysis of inflows and/or


    outflows of cash from/to operating,
    investing and financing activities
    (Deloitte Global Services Limited, 2015).
    This statement shows cash
    transactions only compared to the SCI
    which follows the accrual principle.
    The statement of cash flows, or the
    cash flow statement, is a financial
    statement that summarizes the amount
    of cash and cash equivalents entering
    and leaving a company.
    How to Use a Cash Flow Statement?

    The CFS allows investors to understand


    how a company's operations are running,
    where its money is coming from, and how
    money is being spent. The CFS is
    important since it
    helps investors determine whether a
    company is on a solid financial footing.
    Creditors, on the other hand, can
    use the CFS to determine how
    much cash is available (referred
    to as liquidity) for the company to
    fund its operating expenses and
    pay its debts.
    The Structure of the CFS
    The main components of the cash flow
    statement are:

    1. Cash from operating activities


    2. Cash from investing activities
    3. Cash from financing activities
    Operating Activities
    The operating activities on the CFS include
    any sources and uses of cash from business
    activities. In other words, it reflects how
    much cash is generated from a company's
    products or services.
    These operating activities might
    include:
    Receipts from sales of goods and services
    Interest payments
    Income tax payments
    Payments made to suppliers of goods and services
    used in production
    Salary and wage payments to employees
    Rent payments
    Any other type of operating expenses
    How Cash Flow Is Calculated
    Cash flow is calculated by making certain
    adjustments to net income by adding or
    subtracting differences in revenue,
    expenses, and credit transactions
    (appearing on the balance sheet and
    income statement) resulting from
    transactions that occur from one period to
    the next.
    Two methods of calculating
    cash flow

    the direct method.


    the indirect method.
    Direct Cash Flow Method

    The direct method adds up all the


    various types of cash payments and
    receipts, including cash paid to
    suppliers, cash receipts from
    customers and cash paid out in
    salaries.
    Indirect Cash Flow Method
    cash flow from operating activities is
    calculated by first taking the net income
    off of a company's income statement.
    Because a company’s income statement
    is prepared on an accrual basis, revenue is
    only recognized when it is earned and not
    when it is received.
    The cash flow statement is intended to:

    •Provide information on a firm’s liquidity


    and solvency and its ability to change cash
    flows in future circumstances provide
    additional information for evaluating
    changes in assets, liabilities, and equity;
    •Improve the comparability of different
    firms’ operating performance by
    eliminating the effects of different
    accounting methods; and

    •Indicate the amount, timing, and


    probability of future cash flows.

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