Statement Of Cash Flows Flashcards
What are the primary financial statements?
- Income Statement (IS)
- Statement of Financial Position (SFP)
- Statement of Cash Flows (SCF)
These statements provide a comprehensive view of a company’s financial performance and position.
What does the Statement of Cash Flows (SCF) display?
Displays cash inflows and outflows from financing operations within a period.
Why is cash important for a company?
- Insufficient cash may lead to liquidation
- Excess cash indicates under-utilized resources.
What is the purpose of the Statement of Cash Flows?
- Helps assess liquidity
- Assesses viability
- Evaluates financial adaptability
- Highlights sources and uses of funds.
What is the key difference between cash and profit?
- Profit reflects income and expenses
- Cash focuses on receipts and payments.
What effect does a credit sale have on profit and cash?
- Effect on Profit: Increase
- Effect on Cash: None.
What are the sources of cash?
- Trading sales
- Sale of non-current assets
- Share issues
- Long-term borrowings
- Decrease in working capital.
What are the uses of cash?
- Purchases and trading expenses
- Acquisition of non-current assets
- Paying dividends
- Repaying loans and interest
- Increases in working capital.
How is working capital defined?
Current assets – current liabilities.
What happens to working capital when current liabilities increase?
Working capital decreases.
What does IAS 7 define as cash?
Cash on hand and demand deposits.
What are cash equivalents?
Short-term, highly liquid investments readily convertible to cash with minimal value change risk.
What are the three main sections of the Statement of Cash Flows?
- Cash Flows from Operating Activities
- Cash Flows from Investing Activities
- Cash Flows from Financing Activities.
What does the net cash flow from operating activities typically indicate?
Typically positive.
What is often the net cash flow from investing activities?
Usually negative due to asset acquisitions or business expansion.
