Module 18 - Statement of Cash Flows Flashcards
Key objective for companies…
Generate cash
To make payments, reinvest in business or give a return to shareholders
Information about cash flows important?
Yes,
Shows the ability of companies to generate cash and the needs of the entity to utilise those cash flows
Three sections of cash flow statement?
Operation, investing, financing
Net total = the net increase/decrease for the period
Two methods of operating activities?
Direct method and indirect method
Same answer but some questions may only have some info for one
Cash generated from operations
Investing activities are…
How you invest your money in non current assets
Indirect method starts with…
Profit BEFORE tax
Then finance costs, dep charge, and loss from sale equipment
Operating activities consist of
Revenue producing activities of the entity (day to day operations if buying and selling stock, along with other expenses)
Other activities that are not investing or financing activities (i.e. interest paid and taxes paid)
Direct method for cash generated from Operations…
Cash receipts from customers
AND
Cash paid to suppliers and employees
Direct method:
Cash receipts from customers formula is…
Cash receipts:
Opening trade receivables + revenue - closing trade receivables
Open TR + REV - Closing TR
Direct method
Cash paid to suppliers and employees is…
Opening trade payables + Expenses - Closing trade payables
Calculate purchases as cost of sales
Purchases = Cost of sales from PL - Open inventories + closing
Indirect method…
Cash flows from investing activities…
Acquisition and disposal of assets and long term assets
- Purchase of PPE
- Sale proceeds of PPE
- Purchase of investments
- Proceeds from investments sales
- Payment of loan receivable
- Proceeds of loan receivable payments
Cash flows from financing activities…
Activities that result in the size and composition of debt and equity
- Proceeds from share capital issue
- Proceeds from issue if bonds
- Proceeds from loan received
- Payment of loan liabilities
- Payment of lease liabilities
- Dividends paid
Taxes paid is a cash flow from?
Operating Activities
Direct Method Operations Cash Received formula is…
Indirect cash receipts and indirect cash to supplier/employees formulas are…
