L05 - Cash flow statement

Question 1

Describe CFS

• Less connected to (3)
• Information how (2)
• Used by (2)

Answer 1

Less connected to Balance Sheet, Income Statement, Statement of Stockholder’s Equity

Provides information how a company generates / uses cash.

Used by:

• Creditors, to see if a firm can settle its liabilities and pay dividends
• Investors, to see if a company needs outside financing

Question 2

Comparison:
Income Statement vs. Cash Flow Statement

Answer 2

• Income Statement: Profitability (Revenues & Expenses)
• Cash Flow Statement: Performance (Cash in/out flow)

Question 3

⭐️

• Where is the focus in operating activities? (2)
• Where are operating activities reported? (2)

Answer 3

The focus is on

• selling goods or
• rendering services.

Reported:

• Income Statement - Accrual Basis (Verbuchung von angefallenen, aber noch nicht bezahlten Einnahmen oder Ausgaben.)
• Statement of Cash Flows - Cash Basis

Question 4

Investing Activities

• Cash outflow (2)
• Cash inflow (2)

Answer 4

Cash outflow, from Investments in, own longer-term, assets:

• buying other company’s stocks,
• lending etc.

Cash inflow, from divesting of (sale or disposal)

• assets,
• business segments

Question 5

Financing Activities (2)

Answer 5

• Shareholders Cash: Receiving / Returning
• Creditors Cash: Borrowing / Repaying

Question 6

Cash from Operation. What are the main adjustment steps?

Answer 6

Question 7

What is the purpose of a cash flow statement? (2)

Answer 7

Show how changes in a company’s

• balance sheet
• income statement

affect its cash position. Assess a company’s:

• liquidity,
• solvency, and financial health.

Question 8

What does a negative cash flow mean on a cash flow statement?

• indication for
• counter measures

Answer 8

• It signify financial challenges. Company is using more than it’s generating.
• And require additional financing or cost-cutting measures.

Question 9

Explain the Idea of CFS (Cash Flow Statement)

• Main sections
• Definition / Relate to CF

Answer 9

CFS consists of three main sections:

• Operating activities: Day-to-Day business operations.
• Investing activities: Related to asset investments.
• Financing activities: Raising capital or repaying debts.

Question 9

⭐️
What is the general Sturcture for CFS? (9)

Answer 9