Lecture Eleven Flashcards
what is the third financial statement
statement of cash flows- SCF
what does SCF show
money received - money paid in the year: categorised by the nature & purpose of cash flow
are profit and cash the same
NO
is profit or cash more importnant when assesing a business
they r just as important
why is cash an important tool of measuring a business
- survival of a business depends on ability to pay debts
-need cash to expand and pay dividends
-if go bankrupt= need cash not profit
is cash affected by accounting policies
NO, they r unaffected
Has SCF been around long
NO, since 1990s
what r the sections of the SCF
-cash flows from OPERATING activities
-cash flows from INVESTING activities
-cash flows from FINANCING activities
Net in/dec in cash
Cash @ beginning of year
Cash at end of year
how is the SCF normall prepared
from the SPL & SFP for this& last year & other info
Indirect method of operating activities
Operating Profit
Add Depreciation
Add Loss on sale of property&plant&equip
Less Profit on sale of property&plant&equip
Increase/decrease in Inventories
Increase/decrease in recievables
Increase/decrease in payables
Cash generated from operations
Tax Paid (-)
Net Cash from operating activites
what us working capital
current assets and current liabilites
-what ur working with, availble to business on day to day
idea being the indirect method
adjust the profit figure in order to convert it into cash gnerated from operations
is depreication a cash flow
no its a book entry
why shud u add depreication back
added back to profit in order to work toward the cash generated from operations
-bc it isnt paid in cash
what will an increase in inventory (change in working capital) have on company cash?
-inventory increse = stock of good increase
-costs money = reduce cash
-visa versa
what will an increase in recievables (change in working capital) have on company cash?
-increase reciebavles, customers paying slower
-have to wait longer for cash = reduce cash
what will an increase in payables (change in working capital) have on company cash?
-increase payables = paying suppliers slower
-hold on money lomger = increase cash
direct method for operating activities
Cash recieved from customrs
Cash paid to suppliers & employees
Tax paid
Net cash from operating activites
what method indirect/direct more common
indirect
will the net cash be different depending on the method in operating activites
no net will be the same
scf cash flows from investing activites
Payments to acciqure prop&plant&equi
Proceeds from disposal of prop&plant&equi
Interest recieved
Net cash from investing activites
scf cash flows from financing activites
Proceeds from issue of share cap
proceeds from new long term borrowing
repaymemnt of long term borrowing
dividends paid
interest paid
net cash from financing activites
company cash at the beginning pf the year & end of the year is
balances of cash@bank in hand (& current asset on sfp) - any bank overdraft (in current liabilities on sfp
