Statement of Cash Flow

Statem ent ofCash Flow
 is a financial statement that shows how changes in balance

sheet accounts and income affect cash and cash
equivalents, and breaks the analysis down to operating,
investing and financing activities.
 It is concerned with the flow of cash in and out of the

business.
 It reflects a firm's liquidity.
 It is a cash basis report on three types of financial activities:

operating activities, investing activities, and financing
activities. Non-cash activities are usually reported in
footnotes.

The Cash Flow Statem ent 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.
 Indicate the amount, timing and probability of future

cash flows.

Cash Flow Activities
 Operating activities
 Investing activities
 Financing activities

O perating Activities
 Operating activities include the production, sales and

delivery of the company's product as well as collecting
payment from its customers.
 This could include purchasing raw materials, building

inventory, advertising, and shipping the product.

Investing Activities
 Purchase or Sale of an asset (assets can be land,

building, equipment, marketable securities, etc.)
 Loans made to suppliers or received from customers
 Payments related to mergers and acquisition.

Financing Activities
 It includes the inflow of cash from investors such

as banks and shareholders, as well as the outflow of cash to
shareholders as dividends as the company generates income.
 Dividends paid
 Sale or repurchase of the company's  stock
 Net borrowings
 Payment of dividend tax
 Repayment of debt principal, including capital leases

N otes to FinancialStatem ents
 Also referred to as footnotes.
 It provides additional information pertaining to a company's operations

and financial position and are considered to be an integral part of the
financial statements.
 Footnotes to the financial statements report the details and additional

information that are left out of the main reporting documents, such as
the balance sheet and income statement.
 It is done mainly for the sake of clarity because these notes can be

quite long


Notes are also used to explain the accounting methods used to
prepare the statements and they support valuations for how particular
accounts have been computed.

Footnotes can include inform ation:
 Debt
 Accounts
 Contingent liabilities /contextual information explaining

the financial numbers (e.g. to indicate a lawsuit).