Thursday, 14 November 2019

Unit 6: Cash Flow Statement


                                                      Unit 6: Cash Flow Statement   

Cash flow statement indicates sources of cash inflows and transactions of cash outflows prepared for a period.

It is an important tool of financial analysis and is mandatory for all the listed companies.

The cash flow statement indicates inflow and outflow in terms of three components: (1) Operating, (2) Financing, and (3) Investment activities.

Cash inflows include sale of assets or investments, and raising of financial resources.

Cash outflows include purchase lo assets or investments and redemption of financial resources.

There are two methods of converting net profit into net cash flows from operating activities:  Direct method, and   Indirect method.

Cash: It includes cash in hand and demand deposits with bank.

Cash Equivalents: refer short-term risk free highly liquid investment.

Cash Flow Statement: The statement which indicates the fl ow (movement) of cash during a period.

Flow of Cash: It means the change in cash.

It also includes the infl ow and outfl ow of cash.

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