ANALYSIS OF

FINANCIAL
STATEMENTS
CASH FLOW
STATEMENT
INDEX
1. OBJECTIVES OF CASH FLOW STATEMENT
2. IMPORTNACE OF CASH FLOW STATEMENT
3. LIMITATIONS OF CASH FLOW STATEMENT
4. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
• BALANCE SHEET
• INCOME STATEMENT OR PROFIT AND LOSS ACCOUNTING
• STATEMENT OF CASH FLOWS
5. USES OF CASH FLOW STATEMENT
6. CLASSIFICATION OF BUDINESS ACTIVITIES
• OPERATING ACTIVITIES
• INVESTING ACTIVITIES
7. TYPES OF CASH FLOW STATEMENTS
• DIRECT METHOD
• INDIRECT METHOD
8. CASH FLOW FROM OPERATING ACTIVITIES
9. CASH FLOW FROM INVESTING ACTIVITIES
10. CASH FLOW FROM FINANCING ACTIVITIES
11. ACKNOWLEDGEMENT
12. BIBLIOGRAPHY
 OBJECTIVES OF CASH FLOW
STATEMENT
A Cash flow statement shows inflow and outflow of cash and
cash equivalents from various activities of a company during a
specific period. The primary objective of cash flow statement is
to provide useful information about cash flows (inflows and
outflows) of an enterprise during a particular period under
various heads, i.e., operating activities, investing activities and
financing activities. This information is useful in providing users
of financial statements with a basis to assess the ability of the
enterprise to generate cash and cash equivalents and the
needs of the enterprise to utilise those cash flows. The
economic decisions that are taken by users require an
 IMPORTNACE OF CASH FLOW
STATEMENT
Gives details about spending: A cash flow statement gives
a clear understanding of the principal payments that the
company makes to its creditors. It also shows transactions
which are recorded in cash and not reflected in the other
financial statements. These include purchases of items for
inventory, extending credit to customers, and buying capital
equipment.
Helps maintain optimum cash balance: A cash flow
statement helps in maintaining the optimum level of cash on
hand. It is important for the company to determine if too much
of its cash is lying idle, or if there’s a shortage or excess of
funds. If there is excess cash lying idle, then the business can
Helps you focus on generating cash: Profit plays a key
role in the growth of a company by generating cash. But
there are several other ways to generate cash. For instance,
when a company finds a way to pay less for equipment, it
is actually generating cash. Every time it collects
receivables from its customers quicker than usual, it
is gaining cash.
Useful for short-term planning: A cash flow statement
is an important tool for controlling cash flow. A successful
business must always have sufficient liquid cash to fulfill
short-term obligations like upcoming payments. A financial
manager can analyze incoming and outgoing cash from
past transactions to make crucial decisions. Some
situations where decisions have to be made based on the
cash flow include forseeing cash deficit to pay off debts or
LIMITATIONS OF CASH FLOW
STATEMENT
Cash flow statements, just like Income Statements and
Balance Sheets, are prepared using past information. It
therefore does not provide complete information to
assess the future cash flows of an entity.
As a cash flow statement is based on a cash basis of
accounting, it ignores the basic accounting concept of
accrual.
Cash flow statements are not suitable for judging the
profitability of a firm, as non-cash charges are ignored
while calculating cash flows from operating activities.
Excludes Non-Cash Items: The cash flow
statement does not include non-cash transactions
like depreciation or changes in asset values, limiting
the overall financial picture.
2. Historical Basis: It reflects past cash flows and
may not represent current or future financial
positions accurately due to timing differences.
3. Excludes Future Cash Flows: It focuses on past
and present cash flows, overlooking future cash flow
expectations or potential changes.
4. Limited Net Income or Profitability
Assessment: It does not directly show or measure
net income or profitability, so a company can have
positive cash flow but low profitability, or vice versa.
GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES
Generally Accepted Accounting Principles (GAAP)
call for
three principal financial statements from all firms.
These are
$ Balance Sheet
$ Income Statement or P & L Account
$ Statement of Cash Flows
BALANCE SHEET
In financial accounting, a balance sheet (also known as statement of
financial position or statement of financial condition) is a summary
of the financial balances of an individual or organization, whether it be
a sole proprietorship, a business partnership, a corporation, private limited
company or other organization such as government or not-for-profit
entity. Assets, liabilities and ownership equity are listed as of a specific
date, such as the end of its financial year. A balance sheet is often
described as a "snapshot of a company's financial condition". It is the
summary of each and every financial statement of an organization.
Of the four basic financial statements, the balance sheet is the only
statement which applies to a single point in time of a business's calendar
year.
ASSETS ON THE LEFT, AND FINANCING ON THE RIGHT–
WHICH ITSELF HAS TWO PARTS; LIABILITIES AND
OWNERSHIP EQUITY. THE MAIN CATEGORIES OF ASSETS
ARE USUALLY LISTED FIRST, AND TYPICALLY IN ORDER
OF LIQUIDITY. ASSETS ARE FOLLOWED BY THE
LIABILITIES. THE DIFFERENCE BETWEEN THE ASSETS AND
THE LIABILITIES IS KNOWN AS EQUITY OR THE NET
ASSETS OR THE NET WORTH OR CAPITAL OF THE
COMPANY AND ACCORDING TO THE ACCOUNTING
EQUATION, NET WORTH MUST EQUAL ASSETS MINUS
LIABILITIES.
ANOTHER WAY TO LOOK AT THE BALANCE SHEET
EQUATION IS THAT TOTAL ASSETS EQUALS LIABILITIES
PLUS OWNER'S EQUITY. LOOKING AT THE EQUATION IN
THIS WAY SHOWS HOW ASSETS WERE FINANCED: EITHER
BY BORROWING MONEY (LIABILITY) OR BY USING THE
OWNER'S MONEY (OWNER'S OR SHAREHOLDERS'
EQUITY). BALANCE SHEETS ARE USUALLY PRESENTED
WITH ASSETS IN ONE SECTION AND LIABILITIES AND NET
WORTH IN THE OTHER SECTION WITH THE TWO
A BUSINESS OPERATING ENTIRELY IN CASH CAN MEASURE
ITS PROFITS BY WITHDRAWING THE ENTIRE BANK
BALANCE AT THE END OF THE PERIOD, PLUS ANY CASH IN
HAND. HOWEVER, MANY BUSINESSES ARE NOT PAID
IMMEDIATELY; THEY BUILD UP INVENTORIES OF GOODS
AND ACQUIRE BUILDINGS AND EQUIPMENT. IN OTHER
WORDS: BUSINESSES HAVE ASSETS AND SO THEY
CANNOT, EVEN IF THEY WANT TO, IMMEDIATELY TURN
THESE INTO CASH AT THE END OF EACH PERIOD. OFTEN,
THESE BUSINESSES OWE MONEY TO SUPPLIERS AND TO
TAX AUTHORITIES, AND THE PROPRIETORS DO NOT
WITHDRAW ALL THEIR ORIGINAL CAPITAL AND PROFITS
AT THE END OF EACH PERIOD. IN OTHER WORDS,
BUSINESSES ALSO HAVE LIABILITIES.
INCOME STATEMENT OR
PROFIT AND LOSS
ACCOUNT
An income statement or profit and loss account (also referred to
as a profit and loss statement (P&L), statement of profit or
loss, revenue statement, statement of financial
performance, earnings statement, statement of
earnings, operating statement, or statement of operations) is
one of the financial statements of a company and shows the
company's revenues and expenses during a particular period.
It indicates how the revenues (also known as the “top line”) are
transformed into the net income or net profit (the result after all
revenues and expenses have been accounted for). The purpose of the
income statement is to show managers and investors whether the
company made money (profit) or lost money (loss) during the period
being reported.
INCOME STATEMENT. INSTEAD, THEY PRODUCE A SIMILAR
STATEMENT THAT REFLECTS FUNDING SOURCES COMPARED
AGAINST PROGRAM EXPENSES, ADMINISTRATIVE COSTS, AND
OTHER OPERATING COMMITMENTS. THIS STATEMENT IS
COMMONLY REFERRED TO AS THE STATEMENT OF
ACTIVITIES. REVENUES AND EXPENSES ARE FURTHER
CATEGORIZED IN THE STATEMENT OF ACTIVITIES BY THE
DONOR RESTRICTIONS ON THE FUNDS RECEIVED AND
EXPENDED.
THE INCOME STATEMENT CAN BE PREPARED IN ONE OF TWO
METHODS. [4] THE SINGLE STEP INCOME STATEMENT TOTALS
REVENUES AND SUBTRACTS EXPENSES TO FIND THE BOTTOM
LINE. THE MULTI-STEP INCOME STATEMENT TAKES SEVERAL
STEPS TO FIND THE BOTTOM LINE: STARTING WITH THE GROSS
PROFIT, THEN CALCULATING OPERATING EXPENSES. THEN
WHEN DEDUCTED FROM THE GROSS PROFIT, YIELDS INCOME
FROM OPERATIONS.
ADDING TO INCOME FROM OPERATIONS IS THE DIFFERENCE OF
OTHER REVENUES AND OTHER EXPENSES. WHEN COMBINED
WITH INCOME FROM OPERATIONS, THIS YIELDS INCOME
 STATEMENTS OF CASH FLOW
A cash flow statement is 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.

A company’s financial statements offer investors and analysts a portrait of all the transactions
that go through the business, where every transaction contributes to its success. 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:1
Operating activities: These include revenue and expenses derived from regular goods
and services.
Investment activities: These involve purchasing or selling assets—anything from real
estate to patents—using free cash, not debt. They include both gains and losses.
A cash flow statement provides data regarding all cash inflows that a
company receives from its ongoing operations and external investment
sources.
It 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
(CFO), which includes transactions from all operational business
activities.
Cash flow from investment (CFI) is the second section and the result of
investment gains and losses.
Cash flow from financing (CFF) is the final section, which provides an
overview of cash used from debt and equity.
USES OF CASH FLOW
STATEMENT
The Statement of Cash Flows
-Translates earnings in the Income Statement into cash inflows:
The cash flow statement and the income statement, along with the balance sheet, are the three main financial
statements. The cash flow statement and income statement integrate with the corporate balance sheet.
The cash flow statement is linked to the income statement by net profit or net loss, which is usually the first
line item of a cash flow statement, used to calculate cash flow from operations.
A cash flow statement shows the exact amount of a company's cash inflows and outflows over a period of
time.
The income statement is the most common financial statement and shows a company's revenues and total
expenses, including noncash accounting, such as depreciation over a period of time.
The cash flow statement is linked to the income statement by net profit or net burn, which is the first line item
of a cash flow statement, used to calculate cash flow from operations.
Shows how good is the firm in realizing adequate cash from its
main operating business:
A cash flow statement tracks the inflow and outflow of cash, providing insights into a
company's financial health and operational efficiency.
The CFS measures how well a company manages its cash position, meaning how well the
company generates cash to pay its debt obligations and fund its operating expenses. As one
of the three main financial statements, the CFS complements the balance sheet and the
income statement. In this article, we’ll show you how the CFS is structured and how you
can use it when analyzing a company.
A cash flow statement summarizes the amount of cash and cash equivalents entering and
leaving a company.
The CFS highlights a company's cash management, including how well it generates cash.
This financial statement complements the balance sheet and the income statement.
The main components of the CFS are cash from three areas: Operating activities, investing
activities, and financing activities.
The two methods of calculating cash flow are the direct method and the indirect method.
Reveals if firm needs to look outside for other
sources of finance:
Free Cash Flow: FCF is a measure of financial
performance that shows how much money the company
has left over to expand the business or return to
shareholders after paying dividends, buying back stock, or
paying off debt.
Unlevered Free Cash Flow: UFCF measures the gross FCF
generated by a company before taking interest payments
into account.
Cash Flow to Net Income Ratio: This is the ratio of a
firm's net cash flow and net income, with an optimum goal
of 1:1.
Current Liability Coverage Ratio: This ratio assesses the
company's ability to cover its current liabilities with the
In the Statement of Cash Flows
- definition of cash includes both cash: A cash flow statement provides
data regarding all cash inflows that a company receives from its ongoing operations and
external investment sources.
It includes cash made by the business through operations, investment, and financing—
the sum of which is called “net cash flow.”
AND
- cash equivalents: Cash equivalents are held for the purpose of
meeting short-term cash commitments rather than for investment or
other purposes. For an investment to qualify as a cash equivalent, it
must be readily convertible to a known amount of cash and be subject
to an insignificant risk of changes in value. Therefore, an investment
normally qualifies as a cash equivalent only when it has a short
maturity of, say, three months or less from the date of acquisition.
Investments in shares are excluded from cash equivalents unless they
are, in substance, cash equivalents; for example, preference shares of a
company acquired shortly before their specified redemption date
(provided there is only an insignificant risk of failure of the company to
$ Short term highly liquid instruments maturing in not more than 90
days:
Cash equivalents are investments that can readily be converted into cash. The investment
must be short-term, usually with a maximum investment duration of 90 days. If an investment
matures in more than 90 days, it should be classified in the section named "investments". Cash
equivalents should be highly liquid and easily sold on the market. The buyers of these
investments should be easily accessible.
The dollar amounts of cash equivalents must be known. Therefore, all cash equivalents must
have a known market price and should not be subject to meaningful price fluctuations. The
value of the cash equivalents must not be expected to change significantly before redemption
or maturity. Examples of cash equivalents include:
Certain Marketable Securities: This broad term covers any investment security that
can quickly be converted to cash in a short amount of time. Many of the examples below can
also be referred to as marketable security, and companies often lump these investments
together on their balance sheet. However, many marketable securities do not qualify as cash
equivalents such as stocks and long-term bonds.
Treasury Bills: These debt instruments are issued by the United States government and
have terms ranging from four to 52 weeks.
Other Short-Term Government Bonds: These debt instruments may be
issued by any government entity (city, state, or Federal). The creditworthiness of the
government agency must be considered when evaluating the risk of the bond.
Banker's Acceptance: This financial instrument represents the promise of a
future payment from a bank. It states to whom the payment will be made, the amount,
and on which date. Typically terms are between 30 and 180 days.
Commercial Paper: These are short-term bonds or debt issued by corporations.
Commercial paper has a maturity of up to 270 days, but the average is 30 days. The
interest rate on commercial paper will vary based on the creditworthiness of the
issuing corporation.
Money Market Account: This interest-bearing account is similar to a savings
account, but often pays higher interest. Accounts do have some minor restrictions
relating to withdrawals.
Certificates of Deposits: CDs may be considered cash equivalent depending
on the maturity date.
A company can have too much cash or cash equivalents on hand, though. It may be
inefficient to sit on these resources instead of deploying them for company growth
or rewarding investors with dividends.
$ Treasury Bills ( T-Bills):
The main purpose of the statement of cash flows is to report on the cash
receipts and cash disbursements of an entity during an accounting period.
Broadly defined, cash includes both cash and cash equivalents, such as short-
term investments in Treasury bills, commercial paper, and money market
funds. Another purpose of this statement is to report on the entity’s investing
and financing activities for the period. As shown in Exhibit 1, the statement of
cash flows reports the effects on cash during a period of a company’s
operating, investing, and financing activities. Firms show the effects of
significant investing and financing activities that do not affect cash in a
schedule separate from the statement of cash flows.
The statement of cash flows classifies cash receipts and disbursements as
operating, investing, and financing cash flows. Both inflows and outflows are
included within each category.
1. Operating activities generally include the cash effects (inflows and
outflows) of transactions and other events that enter into the determination
of net income. Cash inflows from operating activities affect items that appear
on the income statement and include: (1) cash receipts from sales of goods or
services; (2) interest received from making loans; (3) dividends received from
Cash outflows for operating activities affect items that appear on the
income statement and include payments:
(1) to acquire inventory;
(2) to other suppliers and employees for other goods or services;
(3) to lenders and other creditors for interest;
(4) for purchases of trading securities;
(5) all other cash payments that do not arise from transactions defined as
investing or financing activities, such as taxes and payments to settle
lawsuits, cash contributions to charities, and cash refunds to customers.
2. Investing activities generally include transactions involving the
acquisition or disposal of noncurrent assets. Thus, cash inflows from
investing activities include cash received from: (1) the sale of property, plant,
and equipment; (2) the sale of available-for-sale and held-to-maturity
securities; and (3) the collection of long-term loans made to others.
Cash outflows for investing activities include cash paid:
(1) to purchase property, plant, and equipment;
(2) to purchase available-for-sale and held-to-maturity securities; and (3) to
Financing activities generally include the cash effects
(inflows and outflows) of transactions and other events
involving creditors and owners.
Cash inflows from financing activities include
• cash received from issuing capital stock and bonds,
•mortgages,
•notes and from other short- or long-term borrowing.
Cash outflows for financing activities include
•payments of cash dividends or other distributions to owners
(including cash paid to purchase treasury stock)
•and repayments of amounts borrowed.
 CLASSIFICATION OF BUSINESS
ACTIVITIES- OPERATING
ACTIVITIES
CASH INFLOW CASH OUTFLOW
IN CASE OF NON FINACE COMPANIES: IN CASE OF NON FINANCE COMPANIES:
1. CASH SALES 1. CASH PURCHASES
2. CASH RECEIVED FROM TRADE 2. PAYMENT TO TRADE PAYABLES
RECEIVABLES
3. PAYMENT OF WAGES
3. ROYALTY, FEE, COMMISSION
RECEIVED 4. INCOME TAX PAID

4. INCOME TAX REFUND IN CASE OF FINANCE COMPANIES:

IN CASE OF FINANCE COMPANIES: 1. PAYMENT OF INTERESTS

1. RECEIPTS OF INTERESTS AND 2. PAYMENT FOR PURCHASE OF

 INVESTING ACTIVITIES
CASH INFLOW CASH OUTFLOW
1. PROCEEDS FROM SALE OF FIXED 1. PURCHASE OF FIXED ASSETS
ASSETS
2. PURCHASE OF SECURITIES AS
2. PROCEEDS FROM SALE OF INVESTMENTS
INVESTMENTS
3. INCOME TAX PAID
3. DIVIDEND RECEIVED
4. BROKERAGE PAID ON PURCHASES OF
4. INTEREST RECEIVED ON INVESTMENTS
INVESTMENTS
5. RENT RECEIVED FROM THE
PROPERTY HELD AS AN INVESTMENT
 FINANCING ACTIVITIES
CASH INFLOW CASH OUTFLOW
1. PROCEEDS FROM ISSUE OF SHARES 1. PAYMENT OF LOANS
2. PROCEEDS FROM ISSUE OF 2. PAYMENT OF REDEMPTION OF
DEBENTURES PREFERENCE SHARES
3. PROCEEDS FROM LONG TERM 3. PAYMENT FOR BUY-BACK OF EQUITY
BORROWINGS SHARES
4. INCREASE IN THE BALANCE OF BANK 4. PAYMENT OF DIVIDEND
OVERDRAFT OR CASH CREDIT
ACCOUNT 5. PAYMENT OF INTEREST
6. DECREASE IN BALANCE AND BANK
OVERDRAFT OR CASH CREDIT ACCOUNT
$ Short term Certificates of Deposits (CDs):
CDs are time deposits issued by banks that pay a fixed interest rate for a specified period.
CDs are considered low-risk investments since they are backed by the issuing bank;
however, there may be a dollar cap as to the amount that is insured. While they are
technically not unsecured like most commercial paper, large denominations of CDs are
often included in the broader category of commercial paper because of their relative
level of liquidity and short-term nature (assuming a more brief CD length).
$ Commercial Paper (CPs):
Commercial paper is a form of unsecured, short-term debt.
It's commonly issued by companies to finance their payrolls, payables, inventories, and
other short-term liabilities.
Maturities on commercial paper range from one to 270 days, with an average of around
30 days.
Commercial paper is issued at a discount and matures at its face value.
The minimum denomination of commercial paper is $100,000 and it pays a fixed rate of
interest that fluctuates with the market.
Types of Commercial Paper:
Promissory Notes:
Promissory notes are written promises to pay a specific amount of money on a certain date.
They are used by companies to borrow funds without having to use any collateral, and
promissory notes can range from just a few days to up to a year. Promissory notes are sold at
a discount from their face value and redeemed at face value upon maturity, meaning the
difference between those two amounts is technically the interest earned.
Drafts:
Drafts are orders written by one party (the drawer) directing another party (the drawee) to pay
a specified sum to a third party (the payee). The drawee is usually a bank. As commercial
paper, drafts can be used in trade financing to facilitate the purchase of goods and services.
Drafts can be either sight drafts which are payable on demand or time drafts which can be
payable at a specific future date.
Bankers' Acceptances:
Bankers' acceptances are time drafts that have been accepted and guaranteed by a bank. They
are commonly used in international trade to ensure payment to exporters. The bank's
acceptance of the draft means that the bank promises to pay the face value of the draft at
TYPES OF CASH FLOW
STATEMENT
The Statement of Cash Flows is prepared by using
$ Direct Method.
$ Indirect Method.
” The only difference between the two methods is, how
cash flows from operating activities are calculated.”
“Cash flows from investing and financing activities are
calculated identically in both methods.”
The net cash inflow from operating activities is the same
whether statement prepared by direct or indirect method.
DIRECT METHOD
The direct method for creating a cash flow statement reports
major classes of gross cash receipts and payments. Under IAS 7,
dividends received may be reported under operating activities or
under investing activities. If taxes paid are directly linked to
operating activities, they are reported under operating activities, if
the taxes are directly linked to investing activities or financing
activities, they are reported under investing or financing activities.
Generally Accepted Accounting Principles (GAAP) vary from
International Financial Reporting Standards in that under GAAP
rules, dividends received from a company's investing activities is
reported as an "operating activity," not an "investing activity."
INDIRECT METHOD
With the indirect method, cash flow is calculated by adjusting
net income by adding or subtracting differences resulting from
non-cash transactions. Non-cash items show up in the changes
to a company’s assets and liabilities on the balance sheet from
one period to the next. Therefore, the accountant will identify
any increases and decreases to asset and liability accounts that
need to be added back to or removed from the net income
figure, in order to identify an accurate cash inflow or outflow.
CASH FLOW FROM
OPERATING ACTIVITIES
Cash flow from operating activities (CFO) indicates the amount of money a company brings in
from its ongoing, regular business activities, such as manufacturing and selling goods or
providing a service to customers. It is the first section depicted on a company's cash flow
statement.
Cash flow from operating activities is an important benchmark to determine the financial
success of a company's core business activities.
Cash flow from operating activities is the first section depicted on a cash flow statement, which
also includes cash from investing and financing activities.
There are two methods for depicting cash from operating activities on a cash flow statement:
the indirect method and the direct method.
Cash flow forms one of the most important parts of business operations and accounts for the
total amount of money being transferred into and out of a business. Since it affects the
company’s liquidity , it has significance for multiple reasons. It allows business owners and
operators check where the money is coming from and going to, it helps them take steps to
generate and maintain sufficient cash necessary for operational efficiency and other necessary
needs, and it helps in making key and efficient financing decisions.
The details about the cash flow of a company are available in its cash flow statement, which is
part of a company's quarterly and annual reports The cash flow from operating activities
depicts the cash-generating abilities of a company’s core business activities. It typically
includes net income from the Income statement and adjustments to modify net income from
an accrual accounting basis to cash accounting basis.
Cash availability allows a business the option to expand, build and launch new products, buy
back shares to affirm their strong financial position, pay out dividends to reward and bolster
shareholder confidence, or reduce debt to save on interest payments. Investors attempt to look
for companies whose share prices are lower and cash flow from operations is showing an
upward trend over recent quarters. The disparity indicates that the company has increasing
levels of cash flow which, if better utilized, can lead to higher share prices in near future.
 Amoun
Cash flows from operating activities
t
a. Net Income
FORMULA:
b. Adjustments for non-cash items:
Cash flow from
•Depreciation and amortization
•Stock-based compensation operating
•Deferred taxes
•Gains/losses on asset sales
activity= Net
income +
c. Adjustments for changes in working capital: depreciation
•Accounts receivable
•Inventory
expense +
•Accounts payable decrease in
•Accrued expenses
•Prepaid expenses accounts
d. Net cash flow from operating activities (Total of a, b,
receivables –
and c) increase in
inventory +
CASH CLOW FROM
INVESTING ACTIVITIES
Cash flow from investing activities is a part of the cash flow statement that
reports the cash inflows and outflows resulting from the investment activities.
These activities primarily involve the acquisition and disposal of long-term
assets such as property, plant, equipment, and investments in marketable
securities.
Any moderation in the cash position of a company that involves fixed assets,
investments in securities, mergers, and acquisitions would be accounted for
under cash from investing activities.
For example, if a business owner invests in a new factory building to expand
its operations, that purchase would be considered a cash outflow from
investing activities. Similarly, if they sell some old machinery the company no
longer needs, the cash received from the sale would be a cash inflow from
investing activities.
Investing activities can include:
Purchase of property plant, and equipment (PP&E), also known
as capital expenditure FORMULA:
Proceeds from the sale of PP&E Cash flow from investing
activities
Acquisitions of other businesses or companies
= CapEx/purchase of non-
Proceeds from the sale of other businesses (divestitures)
current assets +
marketable
Purchases of marketable securities (i.e., stocks, bonds, etc.) securities +
business acquisitions –
Proceeds from the sale of marketable securities
divestitures (sale of
investments
 CASH FLOW FROM
FINANCING ACTIVITIES
Cash Flow from Financing Activities is the net amount of funding a company
generates in a given time period. Finance activities include the issuance and
repayment of equity, payment of dividends, issuance and repayment of debt, and
capital lease obligations. Companies that require capital will raise money by
issuing debt or equity, and this will be reflected in the cash flow statement.
Financing activities include:
Issuance of equity
Repayment of equity
Payment of dividends
Issuance of debt
Repayment of debt
Capital/finance lease payments
Activities in financing are: FORMULA:
Free Cash Flow = Net
Inflow: proceeds from issuing long-term
debt income +
Outflow: repayment of long-term debt Depreciation/Amortiza
tion – Change in
Outflow: principal repayments Working Capital –
of capital lease obligations Capital Expenditure.
Outflow: principal repayments of
finance lease obligations
ACKNOWLEDGEM
ENT
I WOULD LIKE TO CONVEY MY HEARTFELT GRATITUDE
TO MR. VARUN SIR FOR HIS TREMENDOUS SUPPORT
AND ASSISTANCE IN THE COMPLETION OF MY PROJECT.
I WOULD ALSO LIKE TO THANK CENTRAL BOARD OF
EDUCATION (CBSE), FOR PROVIDING ME WITH THIS
WONDERFUL OPPORTUNITY TO WORK ON A PROJECT
WITH THE TOPIC “CASH FLOW STATEMENT- ANALYSIS
OF FINANCIAL STATEMENTS ”. THE COMPLETION OF
THE PROJECT WOULD NOT HAVE BEEN POSSIBLE
WITHOUT THEIR HELP AND INSIGHTS.
BIBLIOGRAPHY
https://corporatefinanceinstitute.com/resources/accounting/cash-flo
w-from-investing-activities/
https://www.investopedia.com/terms/c/cash-flow-from-operating-act
ivities.asp
https://en.m.wikipedia.org/wiki/Income_statement
https://taxguru.in/finance/limitations-cash-flow-statement-analysis-i
nsights.html
https://www.equiruswealth.com/glossary/cash-flow-statement
https://www.investopedia.com/terms/c/commercialpaper.asp
https://www.investopedia.com/ask/answers/031215/what-difference
-between-cash-flow-statement-and-income-statement.asp#:~:text
=3-,The%20cash%20flow%20statement%20is%20linked%20to%20