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*CASH FLOW STATEMENT

MADE BY: GURSIMAR SINGH ROLL NO.:54 MBA (A)

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'Cash Flow Statement'


*The cash flow statement is one of the main financial
statements. The cash flow statement explains how a company's cash and cash equivalents have changed during a specified period of time.

*The document provides aggregate data regarding


all cash inflows a company receives from both its ongoing operations and external investment sources, as well as all cash outflows that pay for business activities and investments during a given quarter.
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The Cash Flow Statement is divided into three distinct sections

* *

Cash flow from operations: The first section is widely regarded as the most important section of the cash flow statement. This section shows whether the company was able to generate cash from its operating activities. Cash flow from investing activities:it focuses on the flow of cash in and out of the company as a result of changes in the company's long-term assets. Generally, cash flow from investing activities will be negative as the company replaces old equipment and as it carries out its capital expenditure program. In a few cases, cash flow from investing activities will be positive as the company experience significant cash inflow from the sale of fixed assets and other investing activities. Cash flow from financing activities: A company will from time to time need to generate external financing to expand its business, build new factories, launch a national marketing campaign etc. The cash for such major activities is usually not forthcoming from earnings and is usually financed by either the sale of debt or the issuing of equity. Cash flow from Financing activities will include this and other similar cash inflows. Cash outflow in this section includes debt payments 6/8/12 (principal), stock repurchase etc.

*It assists users of financial statements in making

Advantages of cash flow statement

judgments on the amount, timing and degree of certainty of future cash flows.

*It gives an indication of the relationship between


profitability and cash-generating ability.

*Analysts and other users of financial information often,


develop models to assess and compare the present value of the future cash flow of entities. Historical cash flow information could be useful to check the accuracy of past assessments.
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*Cash flow statements are based on historical information and

Limitations of cash flow statement

therefore do not provide complete information for assessing future cash flows.

*There is some scope for manipulation of cash flows. For example,


a business may delay paying suppliers until after the year-end, or it may structure transactions so that the cash balance is favorably affected.

*Cash flow is necessary for survival in the short term, but in order
to survive in the long term a business must be profitable. It is often necessary to sacrifice cash flow in the short term in order to generate profits in the long term
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*Thank you

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