Financial Statements & Cash Flow Analysis

Financial Statements & Financial Statements & Financial Statements & Financial Statements &
Cash Flow Analysis Cash Flow Analysis Cash Flow Analysis Cash Flow Analysis
Reports the entitys cash Reports the entitys cash
flows flows cash receipts and cash receipts and
cash payments cash payments during during
the period the period
Summarizes all the Summarizes all the
transactions that affect transactions that affect
the Cash account for a the Cash account for a
period of time period of time
Balance sheet
Income statement
Statement of retained earnings
Statement of cash flows
Financial Statements
Provides information about the cash receipts
and cash payments of a business entity
during the accounting period.
Helps investors with questions about
the companys:
Ability to generate positive cash
flows.
Ability to meet its obligations and to
pay dividends.
eed for e!ternal financing.
Investing and financing transactions
for the period.
Helps investors with questions about
the companys:
Ability to generate positive cash
flows.
Ability to meet its obligations and to
pay dividends.
eed for e!ternal financing.
Investing and financing transactions
for the period.
operating activities operating activities"
investing activities investing activities" and
financing activities financing activities.
operating activities operating activities"
investing activities investing activities" and
financing activities financing activities.
#his statement reports cash inflows inflows
and outflows outflows based on the firms
A summary of a firms receipts and
payments during a period of time.
Financial Statements & Cash Flow Analysis
#he cash flow statement helps to:
$redict future cash flows
%valuate management decisions
&etermine the companys ability to pay
dividends and debt
Show the relationship of net income to cash
flow
INFLOWS
OUTFLOWS
Operating
Activities
Financing
Activities
Investing
Activities
Financing
Activities
Operating
Activities
Investing
Activities
Revenues
do not equal
cash collected
Expenses
do not equal
cash paid
Net income
not equal
to change in cash
#here are two ways to format operating
activities on the cash flow statement:
&irect method ' reports all cash receipts and
cash payments from operating activities
Indirect method ' reconciles net income to net
cash provided by operating activities
Both methods arrive at the same totals for
cash flow
Accounting Standards Board (AcSB)
approved both formats" but encourages
the direct method
Financial Statements & Cash Flow Analysis
Company Name
Statement of Cash Flows
Period Covered
Cash flows from operating activities:
[List of individual inflows and outflows]
Net cash provided (used) by operating activities $ #####
Cash flows from investing activities:
[List of individual inflows and outflows]
Net cash provided (used) by investing activities #####
Cash flows from financing activities:
[List of individual inflows and outflows]
Net cash provided (used) by financing activities #####
Net increase (decrease) in Cash $ #####
Cash (and equivalents) balance at beginning of period #####
Cash (and equivalents) balance at end of period $ #####
Indirect Approach
ANCHOR CORPORATION
Statement of Cash Flows
Year Ended December 31, 20X2

Cash flows fromoperating activities:
Receipts:
Collections from customers $ 271
Interest received on notes receivable 10
Dividends received on investments in stock 9
Total cash receipts $ 290
Payments:
To suppliers $(133)
To employees (58)
For interest (16)
For income tax (15)
Total cash payments (222)
Net cash inflow from operating activities: 68
Cash flows frominvesting activities:
Acquisitions of plant assets $ (306)
Loan to another company (11)
Proceeds fromsale of plant assets 62
Net cash outflow from i nvesting activities: (255)
Cash flows fromfinancing activities
Proceeds fromissuance of common stock $ 101
Proceeds fromissuance of long-term debt 94
Payment of long-term debt (11)
Payment of dividends (17)
Direct Approach
*perating activities
+esult from revenues and e!penses"
,urrent Assets - ,urrent .iabilities
Investing activities
+esult from long/term assets
0inancing activities
+esult from stoc1holders equity" long/
term .iabilities
Customer collections
Operating
Activities
Payments to suppliers
Investing
Activities
Financing
Activities
Receipts of interest and
dividends on investments
Other operating receipts
Payments to employees
Payments of interest, income tax
Other operating disbursements
Sale of plant assets
Sale of investments that are
not cash equivalents
Receipts on loans
receivable
Acquisition of plant assets
Purchase of investments that are
not cash equivalents
Distribution of loans
Issuing Shares
Selling Preference Sharesa
Borrowing money
Payment of dividends
Payments of LT Loans
Payment of principal amounts of
debts
Financial Statements & Cash Flow Analysis
,ash 0low 0rom *perating Activities
&irect method or indirect method (direct
requires also a reconciliation of net
income to cash flow from operating
activities)
,ash 0low from investing activities
,ash 0low from financing activities
Total (positive or negative) cash flow is
added to beginning cash balance and
should result in ending cash balance
Includes:
,urrent assets
,urrent .iabilities
+evenue and %!penses
Includes:
long/term investments
long term notes receivable
$roperty" $lant and %quipment (depreciation
affects operating activities)
Intangible Assets (.#)
Includes:
.ong/term loans
Share ,apital and $aid in ,apital in e!cess
of par
&ividends $aid
Financial Statements & Cash Flow Analysis
et Income
2 &epreciation e!p (noncash e!p)
2 .osses from sale of assets
(full amount of sale already included in investing section)
/ 3ains from sale of assets
(full amount of sale already included in investing section)
/ increases in current assets
2 decreases in current assets
2 increases in current liabilities
/ decreases in current liabilities
= Net cash from operating activities
2 ,ash +eceived from ,ustomers
/ ,ash paid for inventory
/ ,ash paid for operating e!penses
/ ,ash paid for income ta!es
/ ,ash paid for interest
2 ,ash received from dividends and
interest
4 Net cash from operating activities
Current Assets Current Liabilities
Long-Term Assets
Long-Term
Liabilities
Owners Equity
Operating
Cash Flows
Financing
Cash Flows
Operating
Cash Flows
Investing
Cash Flows
Cash and cash equivalents include cash"
plus temporary investments that are highly
liquid (e. g." maturities of three months or
less):
money mar1et accounts
treasury bills
5ar1etable Securities are often excluded.
.iquid liabilities (e. g." line of credit) can be
considered 6negative7 cash equivalents.
Financial Statements & Cash Flow Analysis
ABC Company
Balance Sheet
As at Dec 31, 2010
Equities & Liabilities Assets
2010 2009 2010 2009
Equity i!e" Assets
Sha#e Capital 2$0,000 200,000 Buil"in%s 200,000 1&0,000
'etaine"
Ea#nin%s (3,000 )$,000 Less All *o# Dep +&(,000, +3$,000,
333,000 2)$,000 1$2,000 10$,000
Liabilities Cu##ent Assets
Lon% -e#m Loan $0,000 0 Cash $),000 2$000
Accounts
.ayable )2,000 &$,000 Acc 'ec 120,000 /$,000
112,000 &$,000 0n1ento#y )$,000 &0,000
2a#3et
Secu#ities 30,000 3(,(00
Supplies 2,000 1,200
2/3,000 1(0,000
0ntan%ible
Assest
4oo" 5ill 20,000 2$,000
&&$,000 310,000 &&$,000 310,000
During the year 2010, Co
declared and paid cash
dividend of Rs 20,000
and Stock dividend of Rs
35000.
Required:
Prepare Cash flow
statement for the year
ended Dec 31, 2010.
ABC Company
Balance Sheet
As at Dec 31, 2010
Equities & Liabilities Assets
2009 2010 2009 2010
Equity i!e" Assets
Sha#e Capital 210,000 300,000 2achine#y 110,000 1&0,000
'etaine" Ea#nin%s 30,000 &0,000 Equipments )$,000 (0,000
Less All *o# Dep +20,000, +30,000,
Liabilities Cu##ent Assets
Bon"s payable /$,000 0 Cash 3),000 2$,$00
Accounts .ayable $(,000 $0,000 Acc 'ec &$,000 &0,000
Acc#ue" E!penses 20,000 10,000 Stoc3 1$0,000 13$,000
.#epai" 0nsu#ance /,000 9,$00
393,000 &00,000 393,000 &00,000
During the year 2010,
Co declared and
paid cash dividend
of Rs 45,000
Required:
Prepare Cash flow
statement for the
year ended Dec 31,
2010.
During the year 2010,
Co declared and paid
cash dividend of Rs
5,600
Required:
Prepare Cash flow
statement for the
year ended Dec 31,
2010.
2009 2010
Acc 'ec &2,000 19,000
Accounts
.ayable 1/,000 2$,000
Acc#ues
e!penses 13,000 1$,000
Bon"s
payable 6 &0,000
Buil"in% 6 100,000
Cash 2&,000 10,000
0n1ento#y 30,000 20,000
Lan" 6 (,000
.atents 30,000 7
.#epai"
E!penses &,000 $,&00
'etaine"
Ea#nin% 10,000 22,&00
Sha#e capital 7 9),000
Financial Statements & Cash Flow Analysis
2010 2009
Acc
Dep#eciation ),100 &,(00
Acc 'ec (,$00 9,$00
Accounts
.ayable 1),(00 19,&00
Cash /,000 7
Equipments 30,100 2&,000
0n1ento#y 7 33,200
2o#t%a%e
.ayable ),000 10,000
'etaine"
Ea#nin% 1),/00 12,300
Sha#e capital 30,000 2$,000
Sha#e .#emium 2,$00 0
During the year 2010, Co
declared and paid cash
dividend of Rs 4,000. While
they disposed off an
equipments for Rs 2500
costing Rs 2,000.
Required:
Prepare Cash flow
statement for the year
ended Dec 31, 2010.