C6 - Cashflows Flashcards
What is a cash flow?
A cash flow uses information from the accounting records to show an overall view of money flowing in and out of the company during an accounting period
Cash flows are divided into what 3 sections?
Operating activities
Investing
Financing
What does operating activities mean?
The main revenue producing activities for the business including tax and interest
What does investing activities mean?
The acquisitions and disposals of non current assets and other investment with interest and dividends RECEIVED
What does financing activities mean?
Receipts from issue of new shares, payment to repay share, changes in long term borrowing and PAYMENT of dividends.
What’s the difference between cash and cash equivalents?
Cash - physical money and money in the bank.
Cash equivalents - short term high liquid investments that can be quickly and easily converted into cash.
Are bank overdrafts payable on demand included in cash flows?
Yes
Using a figure from the P or L, what do you start with on a cash flow?
Profit before tax but after finance costs.
How does an increase in asset effect cash on cash flow?
Decrease on cash
How does a decrease in liabilities effect cash on cash flows?
Decrease cash
Add or subtract the following items on a cash flow..
Depreciation charges for the year
Add
Add or subtract the following items on a cash flow..
Finance costs
Add
Add or subtract the following items on a cash flow..
Increase in inventories
Subtract
Add or subtract the following items on a cash flow..
Dividends received
Subtract
Add or subtract the following items on a cash flow..
Loss on disposal of asset
Add
Add or subtract the following items on a cash flow..
Profit on disposal
Subtract
Add or subtract the following items on a cash flow..
Increase in trade receivables
Subtract
Add or subtract the following items on a cash flow..
Increase in trade payables
Add
Add or subtract the following items on a cash flow..
Interest paid in period
Subtract
Add or subtract the following items on a cash flow..
Tax paid on income
Subtract
What is the name of the final item on a cash flow
Net cash from operating activities
How is a loss on disposal treated on the cash flow?
Taken off profit before tax
Added to operating activities
Added to proceeds on disposal
Investing activities on cash flow
How to calculate proceeds on disposal?
Carrying amount add profit / deduct loss
Investing activities on cash flow
How to calculate purchase of PPE
Opening balance - carrying amount - depn charge - closing balance at year end + increase revaluation
How to calculate net cash at beginning and end of year on cash flow?
Cash balance - any overdraft balance
What 7 items are shown as operating activities on a cash flow? Include add or subtractions.
Add depreciation
Add finance costs
Add loss / subtract profit
Add decrease in inventories / subtract increase in inventories
Add decrease in TR / subtract increase in TR
Add increase in TP / subtract decrease in TP
Subtract dividends received
What 3 items are shown in investing activities on a cash flow? Include add and subtraction
Add proceeds
Subtract purchase of PPE
Add dividends received.
What 3 items are found on financing activities? Include add and subtractions
Add increase in bank loan / subtract decrease
Add increase share capital
Subtract dividends PAID
