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CASHFLOW ANALSIS TONY

DEEPA
PANKAJ
WHY CASHFLOW STATEMENT ?
 The major activities of cashflow
* The cash flow statement will reflect the
cash flow effects of each of the major
activities of the enterprise when the
cash flows are classified according to
whether they stem from
*Operating Activities
* Investment Activities
* Financial Activities
 Net Change in Cash and
Cash
Cash Equivalents
Equivalents

MEANING OF CASH FLOW

STATEMENT
 The Cash Flow Statement
means the statement of
changes in Cash and  Cash
equivalents.
It shows the following for the period
covered by it:—

Net
Net Cash
Cash flows
flows
Net Cash flows from Operating
Net Cash flows from from Financing
Investing
Investing Activities
Activities 4 Activities
Activities
 Cash Flows from Operating Activities

Cash Inflows Cash Outflows

•Cash Sales •Cash Purchases
•Cash Receipts •Cash Paid to
from Debtors Suppliers
•Trading •Wages Paid
Commission •Mfg. Oh.Paid
Received •Admin.& Selling
•B/R collected Expenses
5
 Cash Inflows Cash Outflows
Sale of……….. Purchase of…….
• Machinery • Machinery
• Land & Building • Land & Building
• Furniture & Fixtures • Furniture & Fixtures
• Investments • Investments
• Non Operating
Incomes

Investing Activities
* Investing activities are the acquisition and
disposal of long-term Assets and other Investments not
included in Cash equivalents.
 Cash Inflows Cash Outflows
Issue of Purchase of…….
• Equity Share Capital • Buy back of Equity Shares
• Pref. Share Capital
• Debentures • Redemption
Redemption of
of Preference
Preference
Shares
• Raising of other • Repayment of Long-term
borrowings. borrowings Dividend paid
• Interest paid

Financial activities
* These are the activities that result in changes in the size
and composition of the owners’ capital and borrowings
of the enterprise.
Two Formats for Reporting Operating Activities

Direct Method Indirect Method

Reports the cash Starts with

effects of each accrual net
operating activity income and
converts to cash
basis

*Cash Flow Statement

by Direct Method
A. Operating Receipts in Cash:
Cash Sales
Cash receipts from customers
Trading Commission received
B. Operating Payments in Cash:
Cash Purchases
Cash paid to suppliers
Trading Commission paid
Manufacturing Exp. paid
Admin & Selling Exp. paid
C. Cash generated from Operations before taxes [A – B]
D. Income Tax paid (Net of refund)
E. Cash flow before extraordinary items

F. Insurance proceeds from earthquake disaster settlement

G. Net Cash from Operating Activities

* Cash Flow from Operating Activities

(Direct Method )
Particulars
 Balance Sheet of United Brands
Corporation
  2009 2008
Assets    
 
Cash 20 29
Accounts Receivable 30 32
Short term investments   12
Inventory
Prepaid Expenses
50
6
46
3
Balance
sheet
Land 60 80
Building & Equipment 75 81
Less : Accumated Depreciation -20 -16
  221 267
Liabilities    
 
Share holders 145 178
Accounts payable 20 26
Salaries Payable 48 57
Income Tax Payable 8 6
 
  221 267
 Income  
Statement
   
Revenues 2009
Sales Revenue 103
Investment Revenue 3
Gain on Sales 8
   
Expenses  
Cost of Goods sold -60
Salaries Expenses -13
Depreciation Expenses -3
Bond interest Expense
Insurance Expense
-5
-7
Income
Loss on sale of equipment
Income tax expense
-2
-9 Statement
   
Net income 15
 Balance Sheet of United Brands Corporation Income Statement
  2009 2008
Assets     Revenues   2009
  Sales Revenue   103
Cash 20 29 Investment Revenue   3
Accounts Receivable 30 32
Gain on Sales   8
Short term investments 12
Inventory 50 46
Prepaid Expenses 6 3 Expenses    
Land 60 80
Cost of Goods sold   -60
Building & Equipment 75 81
Less : Accumated Depreciation -20 -16 Salaries Expenses   -13
  221 267 Depreciation Expenses   -3
Liabilities     Bond interest Expense   -5
 
Insurance Expense   -7
Share holders 145 178
Accounts payable 20 26
Loss on sale of equipment -2
Salaries Payable 48 57 Income tax expense   -9
Income Tax Payable 8 6
 
  221 267 Net income   15

*Operating activities
Inflows Out flows
 Cash Flow Statement from April 1st 2008 - March
31st 2009
Operating Activities    
Cash Inflows    
From the Customers ( 30-32)+103 101
Cash Outflows    
To Supplier of the Goods -50
To Employees -11
To Insurance Expense -4
For Income Tax -11
Net Cash Flows of Operating Activities   22
*Cash Flows From Investing Activities:

(+) Proceeds From Sale Of Assets

(-) Purchases Of Property And Equipment
(=) Total Net Cash Provided (used) By Investing Activities
Investing Activities    
Cash flows    
Sale Of Land 30 
Sale Of Equipment 12 
Cash outflows    
Purchase of Short Term Investment 18 
Purchase of Land 5 
Net Cash Flows of Investing Activities   19

*Investing activities
 Cash Flow Statement from April 1st 2008 - March 31st 2009
Operating Activities    

Cash Flows    

From the Customers ( 30-32)+103 101

Cash Outflows    
To Supplier of the Goods 50
To Employees 11
To Bond Holders 3
To Insurance Expense 4
For Income Tax 11
Net Cash Flows of Operating Activities   22
Investing Activities    
Cash flows    
Sale Of Land 30 
Sale Of Equipment 12 
Cash outflows    
Purchase of Short Term Investment 18 
Purchase of Land 5 
Net Cash Flows of Investing Activities   -19
   
Financing Activities    
Cash flows    
     
Retriement of bonds Payable 26 
Cash outflows    
Sale of common stock 15 
Payment of Cash Dividend 5 
Net Cash Flows from Financing Activities   6
     
Net increase in Cash   9
Cash Balance on April 1st 2008   20
Cash Balance on 31st March 2009   29
*Cash Flow Statement
by INDIRECT METHOD
 Balance Sheet as on 31st December
Assets 2010 2009
Cash 9,000.00 12,000.00
Short - term investments 10,000.00 1,000.00
Debtors 95,000.00 79,000.00
Provision for Doubtful debts 3,000.00 2,000.00
Inventory 103,000.00 92,000.00
Prepaid Expenses 6,000.00 5,000.00
Land 69,000.00 66,000.00
Machinery 172,000.00 156,000.00
Provision for depreciation 113,000.00 102,000.00
  580,000.00 515,000.00
Liabilities    

Creditors 66,000.00 78,000.00

Bills Payable 2,000.00 -
Securities premium 10,000.00 -
15% Debentures 75,000.00 42,000.00
Equity Share Capital 26,000.00 30,000.00
Profit & Loss Appropriation Account 168,000.00 156,000.00

  347,000.00 306,000.00
Income Statement for the year ended 31st December 2009  
  rs
Net sales Revenue 600,000.00
Cost of good sold (500,000.00)
Gross Margin 100,000.00
Operating Expenses (66,000.00)
Operating Income 34,000.00
Interest Expenses 4,000.00
Income before Tax 30,000.00
Law Suit Compensation 5,000.00
  35,000.00
Income Tax (17,000.00)
Net Income 18,000.00

*INCOME STATEMENT
Cash Flow Statement of ABC Ltd for the Year ended 31st Dec 2009
Rs. Rs.
Cash Flow From Operating Activities

Net profit as per P&L A/c 12000

Adjustments for :
Provision for depreciation 11000
Provision for doubtful debts 1000
Interest paid on debentures 6300

Operating profit before working capital changes 30300

ADD :
Increase in Bills payable 2000
LESS :
Increase in debtors -16000
Increase in Inventory -11000
Increase in Prepaid Expenses -1000
Decrease in Creditors -12000
Cash generated from operating activities -38000

NET CASH FLOW USED IN OPERATING ACTIVITIES(A) -7700

Cash Flows from Investing Activities

Purchase of Land -3000
Purchase of Machinery -16000

NET CASH FLOW USED IN INVESTING ACTIVITIES(B) -19000

Cash flows from financing activities

Securities premium 10000
Issue of 15% debentures 33000
Redemption of equity share capital -4000
Interest paid(15% *42000) -6300

NET CASH FLOWS FROM FINANCING ACTIVITIES(C) 32700

*Thank you