Week 8 - The statement of cash flows

Question 1

What is the Statement of Profit or Loss (Income Statement)?

Answer 1

It is a core financial statement that reports a company’s financial performance over an accounting period. It shows all income (revenues, gains) and expenses (costs, losses), leading to the net profit or loss for the period.

Question 2

What components are included in the Statement of Profit or Loss?

Answer 2

Revenue or Sales

Cost of Goods Sold (COGS)

Gross Profit

Operating Expenses (e.g., salaries, rent, utilities)

Operating Profit

Finance Costs (e.g., interest)

Tax Expense

Net Profit or Loss

Question 3

What is the Statement of Financial Position (Balance Sheet)?

Answer 3

It is a snapshot of a company’s financial condition at a specific point in time, usually the end of an accounting period. It lists all assets, liabilities, and equity, showing what the company owns and owes.

Question 4

What is the basic accounting equation shown in the Statement of Financial Position?

Answer 4

Assets = Liabilities + Equity
This reflects that the company’s resources (assets) are funded by debt (liabilities) and owners’ capital (equity).

Question 5

What are the three main sections of the Statement of Financial Position?

Answer 5

Assets: Current (e.g., cash, inventory) and non-current (e.g., equipment, property)

Liabilities: Current (e.g., accounts payable) and non-current (e.g., long-term loans)

Equity: Share capital, retained earnings, reserves

Question 6

What is the Statement of Cash Flows?

Answer 6

This statement shows how cash is generated and used during an accounting period. It helps explain changes in cash balances from the beginning to the end of the period.

Question 7

What are the three main sections of the Statement of Cash Flows?

Answer 7

Operating Activities: Cash from core business operations (e.g., receipts from customers, payments to suppliers)

Investing Activities: Cash from buying/selling assets (e.g., equipment, investments)

Financing Activities: Cash from borrowing or repaying loans, issuing shares, or paying dividends

Question 8

What is meant by “flow” and “snapshot” in financial statements?

Answer 8

Flow: Shows performance over a period of time (e.g., the Profit or Loss Statement and Cash Flow Statement).

Snapshot: Shows the financial position at a specific point in time (e.g., the Statement of Financial Position).

Question 9

How does the Statement of Financial Position relate to the Statement of Profit or Loss?

Answer 9

The Statement of Financial Position at the start of Year 1 provides the opening balances.

The Statement of Profit or Loss shows how income and expenses changed these balances during the year.

The resulting end-of-year balances are reflected in the Statement of Financial Position at the end of Year 1.

Question 10

How does profit affect the Statement of Financial Position?

Answer 10

Net profit increases retained earnings (a component of equity) in the Statement of Financial Position.

A net loss reduces retained earnings.

Question 11

What is the link between the Cash Flow Statement and the Statement of Financial Position?

Answer 11

The cash/overdraft balance at the start of the year is taken from the opening Statement of Financial Position.

The Statement of Cash Flows explains how that balance changed over the year.

The ending cash/overdraft is shown in both the Cash Flow Statement and the closing Statement of Financial Position.

Question 12

How are multiple years of financial statements connected?

Answer 12

Year 1’s end-of-year Statement of Financial Position becomes the opening balance for Year 2.

The Profit or Loss and Cash Flow Statements for Year 2 explain the changes leading to the Year 2 closing balances.

Question 13

Why is it important to understand the linkage between the statements?

Answer 13

It allows users to track how operational results (profit/loss) and cash movements affect the company’s financial health over time.

Helps assess liquidity, profitability, and financial stability.

Question 14

What is the conceptual challenge with understanding the Statement of Cash Flows?

Answer 14

It requires you to reverse the effects of accruals accounting and focus solely on actual cash movements, not on when revenues or expenses are recognised in the Profit or Loss statement.

Question 15

What is accruals accounting?

Answer 15

Accruals accounting records income and expenses when they are earned or incurred, not when cash is received or paid. This can cause timing differences between profit and cash flow.

Question 16

What is revenue recognition under accruals accounting?

Answer 16

Revenue is recorded when goods or services are delivered, even if payment hasn’t been received yet.

For example, a credit sale increases revenue and accounts receivable, but does not involve cash.

Question 17

What is the matching principle?

Answer 17

Expenses are matched to the revenue they help generate — they’re recorded in the same period as the related income, even if the cash is paid at a different time.

Question 18

What’s an example of an expense that affects profit but not cash flow?

Answer 18

Depreciation — it reduces profit as a non-cash expense but has no impact on cash flow.

Question 19

Why can accrual accounting lead to major differences between profit and cash flow?

Answer 19

Because revenue and expenses can be recognised before or after the actual cash moves — leading to situations where a company reports profit but has poor cash flow (or vice versa).

Question 20

How does the Statement of Cash Flows adjust for accrual accounting?

Answer 20

In the indirect method, the cash flow from operating activities starts with net profit and adjusts for:

Non-cash items (e.g., depreciation)

Changes in working capital (e.g., receivables, payables, inventory)

Question 21

What is the purpose of the Statement of Cash Flows?

Answer 21

The Statement of Cash Flows explains how a company’s cash and cash equivalents (bank balances, short-term investments, etc.) have changed between two periods — typically from last year’s to this year’s Statement of Financial Position. It shows how cash has been generated and used over the year.

Question 22

Why is the Statement of Cash Flows important?

Answer 22

It provides key insights into a company’s liquidity and its ability to meet short-term obligations. It helps users of the financial statements understand:

Where cash comes from (operating, investing, financing activities)

How cash is spent (e.g., on operating costs, capital expenditures, debt repayment)

Question 23

How is the Statement of Cash Flows related to the Statement of Financial Position?

Answer 23

The Statement of Cash Flows shows the change in cash and cash equivalents from one period to the next, which is directly reflected in the Statement of Financial Position at the end of the accounting period.

Question 24

How does the Statement of Cash Flows fit within the set of financial statements?

Answer 24

It is the third main financial statement, alongside:

The Statement of Financial Position (Balance Sheet)

The Statement of Profit or Loss (Income Statement)
Together, these provide a complete picture of the company’s financial health, performance, and cash management.

Question 25

What are the arguments against the necessity of the Statement of Cash Flows?

Answer 25

Information is available in other statements: Cash-related details can be found in the Statement of Profit or Loss (SOPL) and Statement of Financial Position (SOFP). No incremental value: Some research suggests that the Statement of Cash Flows doesn’t provide additional information beyond what’s already disclosed in the other statements.

Question 26

What are the arguments in favour of the Statement of Cash Flows?

Answer 26

More comparable between firms: The Statement of Cash Flows offers less room for accounting judgment compared to accrual-based income statements, making it more standardized and comparable across companies. Easier for users to understand: Users often find cash flow information more intuitive and practical, especially in assessing a company’s liquidity. Indicates solvency: It provides insights into a company’s ability to pay off its short-term debts and its overall solvency. Influences share prices: Research shows that cash flow disclosures can affect a company's market valuation, meaning it provides incremental information beyond what is found in the SOPL and SOFP.

Question 27

Why is the Statement of Cash Flows particularly useful to users?

Answer 27

Because it gives a clearer view of a company's cash generation and usage, helping users assess its financial health, liquidity, and solvency, which can be hard to gauge purely from accrual-based financial statements like the Statement of Profit or Loss.

Question 28

Does the Statement of Cash Flows provide new information?

Answer 28

Yes, even though some argue that other statements offer the same details, research shows that the Statement of Cash Flows offers new, relevant insights into a company’s ability to generate cash and its overall solvency, which can influence decisions like investment and creditworthiness.

Question 29

Why is cash flow information necessary alongside the income statement (I/S) and balance sheet (B/S)?

Answer 29

Cash flow information helps assess the company’s liquidity, viability, and financial flexibility, giving a clearer picture of the company's financial health. It provides extra insights that complement the I/S and B/S.

Question 30

Does the Statement of Cash Flows replace the other financial statements?

Answer 30

No, the Statement of Cash Flows does not replace the I/S or B/S. It adds value by providing additional information that the other statements do not, particularly regarding cash movements and liquidity.

Question 31

What does the Statement of Cash Flows tell users about a company’s operations?

Answer 31

It informs users about the company’s ability to: Pay dividends Pay interest Repay bank loans and debentures Finance investments It shows how cash is generated and spent, which is crucial for understanding a company’s financial sustainability.

Question 32

How can poor cash flow indicate financial distress?

Answer 32

Poor cash flow can signal financial distress, as it shows the company may struggle to meet short-term obligations or fund its operations, which could eventually lead to insolvency if not addressed.

Question 33

Why is the Statement of Cash Flows harder to manipulate than accrual-based profits?

Answer 33

The Statement of Cash Flows is less open to manipulation by managers because cash is a tangible measure, unlike accrual-based profits, which can be influenced by earnings management (e.g., altering depreciation schedules or recognising revenue early).

Question 34

What is cash as defined in financial statements?

Answer 34

Cash refers to physical currency (notes and coins) and deposits available on demand at a financial institution (e.g., a bank), which can be accessed immediately.

Question 35

What are cash equivalents?

Answer 35

Cash equivalents are highly liquid investments with short periods to maturity (typically less than 3 months) that are easily converted to cash at the investor’s option and are subject to an insignificant risk of changes in value.

Question 36

Can you give examples of cash equivalents?

Answer 36

Examples include short-term money market investments, certificates of deposit (CDs), and other investments with maturity periods of less than 3 months that can be easily liquidated.

Question 37

What is excluded from cash equivalents?

Answer 37

Loans that must be repaid in the short term are not considered cash equivalents. Bank overdrafts are also excluded, as they represent a negative cash position.

Question 38

Are bank overdrafts considered part of cash and cash equivalents?

Answer 38

No, bank overdrafts are considered a negative cash position and, therefore, are not included in cash or cash equivalents.

Question 39

* Which of these would be a cash equivalent? – Accounts receivable – Accounts payable – Gold bullion – Deposits available on call – Deposits on money market accounts available at 2 months notice – Bank overdrafts – A loan repayable in two months

Answer 39

deposits available on call are considered cash equivalents. These are highly liquid and can be converted to cash at any time with no significant risk of change in value

Question 40

What are the three main sections of the Statement of Cash Flows?

Answer 40

The Statement of Cash Flows is divided into three sections: Cash Flows from Operations (CFO) Cash Flows from Investing (CFI) Cash Flows from Financing Activities (CFF)

Question 41

What does Cash Flows from Operations (CFO) represent?

Answer 41

CFO shows the cash generated or used by a company's core business activities, including: Receipts from customers Payments to suppliers and employees Other operating-related activities (e.g., interest and tax payments)

Question 42

What does Cash Flows from Investing Activities (CFI) represent?

Answer 42

CFI shows cash flows related to purchases and sales of long-term assets (e.g., property, equipment, investments) and other investment activities. Examples: Buying or selling property, plant, and equipment Investments in securities (e.g., stocks, bonds)

Question 43

What does Cash Flows from Financing Activities (CFF) represent?

Answer 43

CFF shows cash flows associated with borrowing and repaying funds or changes in the company’s equity structure. Examples: Issuing or repurchasing stock Borrowing or repaying loans Paying dividends

Question 44

What is the general structure of the Statement of Cash Flows?

Answer 44

The statement is structured as follows: Cash Flows from Operations (CFO) Cash Flows from Investing (CFI) Cash Flows from Financing Activities (CFF)

Question 45

What are some examples of cash inflows under Cash Flows from Operations (CFO)?

Answer 45

Receipts from the sale of goods Cash received from customers for products or services sold

Question 46

What are some examples of cash outflows under Cash Flows from Operations (CFO)?

Answer 46

Paying wages and employee benefits Tax expenses Purchasing inventory or paying suppliers for goods or services used in operations

Question 47

What are some examples of cash inflows under Cash Flows from Investing Activities (CFI)?

Answer 47

Sale of non-current assets (e.g., selling property, equipment, or vehicles) Sale of long-term investments (e.g., stocks, bonds)

Question 48

What are some examples of cash outflows under Cash Flows from Investing Activities (CFI)?

Answer 48

Purchase of non-current assets (e.g., buying property, equipment, or machinery) Purchase of long-term investments (e.g., capital expenditures or investments in other companies)

Question 49

What are some examples of cash inflows under Cash Flows from Financing Activities (CFF)?

Answer 49

Issuing shares (e.g., raising capital through stock issuance) Issuing debt (e.g., borrowing funds from financial institutions)

Question 50

What are some examples of cash outflows under Cash Flows from Financing Activities (CFF)?

Answer 50

Repurchasing shares (e.g., buybacks of stock) Repaying debt (e.g., paying off loans or bonds)

Question 51

What are operating activities in the context of cash flows?

Answer 51

Operating activities are the principal revenue-producing activities of a company, along with other activities that are not related to investing or financing. They include day-to-day activities such as selling goods and providing services.

Question 52

What does Cash Flows from Operating Activities (CFO) represent?

Answer 52

CFO represents the net increase or decrease in cash resulting from a company’s normal trading activities, such as selling products, paying suppliers, and other operational expenditures.

Question 53

How are Cash Flows from Operating Activities (CFO) derived?

Answer 53

CFO can be derived using two methods: Direct method – directly lists cash receipts and payments from operating activities. Indirect method – starts with net income and adjusts for non-cash items and changes in working capital.

Question 54

Which method is more commonly used to calculate CFO, and why?

Answer 54

The indirect method is more commonly used because it starts with net income and is easier to prepare, as it requires less detailed tracking of cash receipts and payments.

Question 55

What types of transactions are included in Cash Flows from Operating Activities?

Answer 55

Receipts from customers Payments to suppliers and employees Interest paid or received Taxes paid

Question 56

What are the two methods for calculating Cash Flows from Operating Activities (CFO)?

Answer 56

Direct Method Indirect Method

Question 57

What is the Direct Method for calculating CFO?

Answer 57

The Direct Method involves: Summarising actual cash transactions (cash received and paid) Listing cash receipts (e.g., from customers) and cash payments (e.g., to suppliers, for wages) Requires detailed info from the cash/bank accounts

Question 58

What is a key challenge of using the Direct Method?

Answer 58

It requires complete transaction-level data for all revenues and expenses, which can be time-consuming and complex to gather.

Question 59

What is the Indirect Method for calculating CFO?

Answer 59

The Indirect Method: Starts with net profit (from the income statement) Adjusts for non-cash items (e.g., depreciation) Adjusts for changes in working capital (e.g., inventory, receivables, payables)

Question 60

Why is the Indirect Method more commonly used?

Answer 60

It is easier to prepare since it uses data already available from the income statement and balance sheet, and does not require detailed cash transaction data.

Question 61

Which method is most commonly used in practice: direct or indirect?

Answer 61

Most companies use the indirect method because the necessary data is already available from the Statement of Profit or Loss and the Statement of Financial Position, requiring minimal extra effort.

Question 62

Which method is preferred by IAS 7 (International Accounting Standard 7)?

Answer 62

IAS 7 prefers the direct method because it provides more useful and transparent information for estimating a company’s future cash flows.

Question 63

Why do companies prefer the indirect method despite IAS 7's preference for the direct method?

Answer 63

It’s easier and cheaper to prepare It uses already available accounting data It avoids disclosing sensitive details, such as the exact cash received from customers and cash paid to suppliers, which competitors might find useful

Question 64

What’s the main drawback of the direct method from the company’s perspective?

Answer 64

It requires extra data collection and may reveal commercially sensitive information, such as exact cash inflows and outflows.

Question 65

What are the key components of operating cash flows under the Direct Method?

Answer 65

Receipts from customers Payments to suppliers and employees Dividends received (can also be shown under investing activities) Interest paid (in cash) Income taxes paid (in cash)

Question 66

Why are the figures for interest and tax different in the Direct Method compared to the Income Statement?

Answer 66

The Direct Method includes only actual cash paid, not the accrual-based expense figures from the income statement. Interest paid ≠ interest expense, and Taxes paid ≠ tax expense

Question 67

What key items are not visible when using the Indirect Method?

Answer 67

Receipts from customers Payments to suppliers and employees These are not shown separately under the Indirect Method—they’re embedded in the reconciliation from profit to cash.

Question 68

Why might users prefer the Direct Method?

Answer 68

It provides clear visibility of actual cash transactions, which helps assess the company’s cash-generating ability and manage short-term liquidity.

Question 69

What is the starting point for the Indirect Method of calculating CFO?

Answer 69

Start with Net Profit Before Tax from the Income Statement.

Question 70

What adjustments are made first to Net Profit Before Tax in the Indirect Method?

Answer 70

Adjust for non-operational items (e.g., interest expenses) to get to Operating Profit.

Question 71

What non-cash items are adjusted for in the Indirect Method?

Answer 71

Depreciation Amortisation Changes in provisions (e.g., provision for doubtful debts)

Question 72

What changes in working capital are adjusted for in the Indirect Method?

Answer 72

Adjust for changes in: Inventories Trade Receivables Trade Payables

Question 73

After calculating cash generated from operations, what further adjustments are made?

Answer 73

Add or subtract actual cash payments for: Income taxes paid Interest paid (These are cash figures, not the accrual-based expense amounts from the income statement.)

Question 74

What is the final result of the Indirect Method process?

Answer 74

The total is Net Cash Flow from Operating Activities.

Question 75

Why is Net Profit from the Income Statement not the same as Cash Flow from Operations (CFO)?

Answer 75

Because Net Profit includes: Non-cash items (e.g., depreciation) Working capital movements Non-operating gains/losses Accruals, not actual cash paid (e.g., tax expense ≠ tax paid)

Question 76

What is the first step in converting Net Profit to CFO (indirect method)?

Answer 76

Start with Net Profit (or Profit Before Tax) from the Income Statement.

Question 77

What are examples of non-cash components that must be adjusted for?

Answer 77

Depreciation Amortisation Provisions (e.g., for bad debts)

Question 78

What are the key working capital movements adjusted for in CFO?

Answer 78

Trade Receivables (affects cash received) Trade Payables (affects cash paid) Inventory (affects cost of goods sold vs. inventory purchased)

Question 79

How are non-operating profits or losses treated in CFO?

Answer 79

Exclude profits or losses from disposal of non-current assets (e.g., a gain on selling equipment), as these are investing activities, not operating.

Question 80

What happens with mismatches between expense and actual cash flow (e.g., tax)?

Answer 80

Add back expense (e.g., tax or interest) Deduct the actual cash paid for the same item (e.g., tax paid)

Question 81

What is the final result after all these adjustments?

Answer 81

You arrive at Net Cash Flow from Operating Activities (CFO) using the indirect method.

Question 82

What is the starting point for calculating CFO using the indirect method?

Answer 82

Profit Before Tax

Question 83

What items are added back to Profit Before Tax to calculate CFO?

Answer 83

Interest expense Depreciation and amortisation (non-cash) Loss on sale of non-current assets Increases in payables and accruals Decreases in inventory, receivables, and prepayments

Question 84

What items are deducted from Profit Before Tax to calculate CFO?

Answer 84

Profit on sale of non-current assets Increases in inventory, receivables, and prepayments Decreases in payables and accruals Cash interest paid (if not included in financing) Cash tax paid

Question 85

Why are depreciation and amortisation added back?

Answer 85

Because they are non-cash expenses—they reduce accounting profit but don't involve cash outflow.

Question 86

Why are working capital changes adjusted for in CFO?

Answer 86

They reflect timing differences between income/expenses and actual cash movements, e.g.: An increase in receivables means more sales on credit → less cash received

Question 87

What is the final result of these adjustments?

Answer 87

Net Cash Flow from Operating Activities

Question 88

Class exercise 3 Grieves plc has profit before tax of £2,000,000. What are cash flows from operations if the following information is provided: * Depreciation charges £800,000 * Increase in inventories £130,000 * Decrease in trade receivables £100,000 * Increase in trade payables £80,000

Answer 88

Start with: Profit before tax = £2,000,000 Adjustments: Depreciation = +£800,000 – Increase in inventories = –£130,000 Decrease in receivables = +£100,000 Increase in payables = +£80,000 CFO = 2,000,000 + 800,000 - 130,000 + 100,000 + 80,000 = £2,850,000

Question 89

What is the typical structure for calculating CFO using the indirect method?

Answer 89

Start with Operating Profit Add back depreciation (non-cash) Adjust for working capital changes:  – (Increase)/Decrease in Trade Receivables  – (Increase)/Decrease in Inventories  – Increase/(Decrease) in Trade Payables Result = Cash generated from operations Then deduct interest paid if included in CFO

Question 90

Why do we add back depreciation to operating profit when calculating CFO?

Answer 90

Because depreciation is a non-cash expense—it reduces accounting profit but does not involve cash outflow.

Question 91

How do working capital changes affect cash flow from operations?

Answer 91

Increase in trade receivables → less cash collected → deduct Increase in inventories → more stock purchased → deduct Increase in trade payables → less cash paid to suppliers → add

Question 92

What is the impact of interest expenses and interest paid in CFO?

Answer 92

Interest expense is part of net profit but is added back to reach operating profit Interest paid (in cash) may be deducted from CFO (if treated as an operating item), or included in cash flows from financing (CFF) instead

Question 93

GRFL example – if interest paid is €20k and is included in CFO, what adjustment is needed?

Answer 93

If Cash Generated from Operations = €255k, and interest paid = €20k, then: Adjusted CFO = €255k – €20k = €235k

Question 94

How do you determine cash flows from investing and financing activities?

Answer 94

By comparing two consecutive Statements of Financial Position, and: Excluding operating working capital changes Focusing on non-cash and long-term items Identifying which relate to investing vs. financing activities

Question 95

What are examples of changes that affect Cash Flow from Investing (CFI)?

Answer 95

Purchase of non-current assets → cash outflow Sale of non-current assets → cash inflow Purchase/sale of long-term investments Loans made to others (investing activity)

Question 96

What are examples of changes that affect Cash Flow from Financing (CFF)?

Answer 96

Issue of shares or debentures → cash inflow Repurchase of shares (buybacks) → cash outflow Borrowing from banks (new loans) → cash inflow Repayment of loans → cash outflow Dividends paid → cash outflow

Question 97

What items should NOT be included when calculating CFI or CFF?

Answer 97

Changes in inventory, receivables, or payables (those belong to operating activities) Non-cash adjustments, such as depreciation or revaluation of assets

Question 98

What is the role of the Statement of Financial Position in determining CFI & CFF?

Answer 98

It helps identify: Movements in non-current assets → CFI Changes in equity and long-term liabilities → CFF These are matched against cash inflows/outflows in the Statement of Cash Flows.

Question 99

What are investing activities in the context of cash flow?

Answer 99

Investing activities involve the acquisition and disposal of non-current assets and other investments that are not included in cash equivalents.

Question 100

What are the cash flows from investing activities (CFI)?

Answer 100

Cash flows from investing activities include: Purchase of Property, Plant, and Equipment (PPE) Purchase of intangible assets Proceeds from the sale of PPE and intangible assets Proceeds from the sale of investments Interest and dividends received (sometimes also classified under operating activities)

Question 101

Why is the separate disclosure of CFI important in financial statements?

Answer 101

CFI shows how cash has been used to acquire resources (such as PPE, intangibles, or investments) that are expected to generate future income and future cash flows.

Question 102

How are interest and dividends treated in investing activities?

Answer 102

Interest received and dividends received may be classified under investing activities if they are from non-operating investments. In some cases, they may also be classified under operating activities depending on the company's accounting policy.

Question 103

What’s the main purpose of Cash Flow from Investing Activities (CFI)?

Answer 103

CFI reveals how a company spends or generates cash by acquiring or disposing of assets that generate future income or cash flows.

Question 104

What is the general approach for calculating Cash Flow from Investing Activities (CFI) related to PPE purchases?

Answer 104

You calculate the cash spent on the purchase of PPE by comparing the changes in the cost or net book value (NBV) of PPE between the beginning and end of the period. Two methods are used: Method 1: Using cost of PPE Method 2: Using net book value (NBV) of PPE

Question 105

How is Cash Flow from Investing Activities calculated using cost of PPE?

Answer 105

Cash spent on PPE = Closing Balance (CB) of PPE at Cost - Opening Balance (OB) of PPE at Cost + Purchase of PPE - Disposed PPE at Cost This method focuses on the purchase and disposal of assets at their historical cost

Question 106

How is Cash Flow from Investing Activities calculated using net book value (NBV) of PPE?

Answer 106

Using the formula: Cash spent on PPE = Closing Balance (CB) of PPE at NBV - Opening Balance (OB) of PPE at NBV + Purchase of PPE - Disposed PPE at NBV - Annual Depreciation This method focuses on the net book value (which is after depreciation) of the assets.

Question 107

What information do you need to calculate Cash Flow from Investing Activities using these methods?

Answer 107

Opening and closing balances of PPE Annual depreciation (for the NBV method) Purchase and disposal of PPE (either at cost or NBV)

Question 108

Why are interest income and dividend income excluded in some CFI calculations?

Answer 108

Because interest and dividends may be classified under operating activities, not investing activities, depending on the company's accounting policy. If they aren't explicitly listed in the Statement of Profit or Loss, they don't need to be included in CFI.

Question 109

What does Cash Flow from Investing Activities tell you about a company?

Answer 109

It shows how much cash the company spent on acquiring assets like PPE or generated from disposals of assets. This is important for understanding how the company is investing in resources that will generate future cash flows.