Lecture 5b cash flow statemet

Question 1

What are cash flows from operating activities?

Answer 1

Cash flows that arise form the normal trading activities of the business e.g profit for the month

Question 2

What is the formula of cash flows from operating activities?

Answer 2

money received from customers- money paid to suppliers and employers and operating expenses and interest and tax

Question 3

What are cash flows from investing activities?

Answer 3

includes the amounts paid out to purchase non-current assets and the proceeds received from selling non-current assets

Question 4

What is working capital?

Answer 4

the amount invested in short term assets to the business e.g inventories, short term receivables, cash balance less short term liabilities

defined as current assets less current liabilities

Question 5

What is the structure of a cash flow statement- 4 steps?

Answer 5

1. Start with opening cash
2. Add any incoming cash (cash received)
3. Subtract any outgoing cash (cash spent)
4. Result = closing cash (cash on exit)