Ch 11 - Cash flow statement Flashcards
What is a cash flow statement?
It reports on the movements of cash into and out of a business during the reporting period
What is the purpose of a cash flow statement?
Together the income statement, balance sheet and cash flow statement they report on profit performance, financial position and cash movements
What areas does the cash flow statement cover?
- determine net amount of cash generated daily business activities
- evaluates business’ ability to meet future liabilities
- assess the business’ long term debt arrangements
- review the commitment of the business in relation to non-current asset
Profit and cash are two different measures? True or False? And why?
True. Because even if a business is profitable it will not survive if it doesn’t have the cash available to meet its obligations
How do you calculate net profit?
gross profit - expenses
What are the groups of cash flows?
- operating activities
- Investing activities
- Financing activities
What are operating activities? What cash movements does it include
relate to the everyday operations of the business.
- cash inflows for goods and services
- cash outflows for employees and suppliers
Credit sales are relevant in cash flow statement? true or false?
false
What are investing activities?
relate to the buying and selling of non-current assets
What are financing activities
activities that as cash flows that are a result of changes in a business’s financial structure
eg: capital contributions (cash only), withdrawals, loans
What are the calculations after the classifications in a cash flow statement?
- Net increase (decrease) in cash held
- Cash held at the beginning of the year
- Cash held at the end of the year
What are brackets around numbers used for in cash flow statement?
Show the cash outflows
How do you calculate net increase in cash held?
cash held at beginning of year - cash held at end of year
