CASH FLOW STATEMENT

CASH FLOW STATEMENT

Introduction to cash flow statement:-

                                                                 Three major financial statements are ordinarily required for external reports an income statement, a balance sheet, and a statement of cash flows. The purpose of the statement of cash flow is to highlight the major activities that directly and indirectly impact cash flows and hence affect the overall cash balance.

DEFINITION:-

                             The statement of cash flows is one of the main financial statements. The cash flow statement reports the cash generated and used during the time interval specified in its heading. The period of time that the statement covers is chosen by the company.

The cash flow statement organizes and reports the cash generated and used in the following categories:

1.	Operating activities	–	Converts the items reported on the income statement from the accrual basis of accounting to cash.
2.	Investing activities	–	Reports the purchase and sale of long-term investments and property, plant and equipment.
3.	Financing activities	–	Reports the issuance and repurchase of the company's own bonds and stock and the payment of dividends.

Operating Activities:

                                                        Operating activities involve the cash effects of transactions that enter into the determination of net income, such as cash receipts from sales of goods and services and cash payments to suppliers and employees for acquisition of inventory and expenses.

Investing Activities:

                                                       Investing activities generally involve long term assets and include making and collecting loans acquiring and disposing of investments and productive long lived assets.

Financing Activities:

                                                        Financing activities involve liability and stock holder's equity items and include obtaining cash from creditors and repaying the amounts borrowed and obtaining capital from owners and providing them with a return on, and a return of, their investment.

 FORMAT OF CASH FLOW STATEMENT

The cash flow statement is divided into three sections:

o Cash flow from operating activities: shows the results of cash inflows and outflows related to the fundamental operations of the basic line or lines of business in which the company engages. (Example: cash receipts from the sale of goods or services and cash outflows for purchasing inventory and paying rent and taxes.)

o Cash flow from investing activities: associated with purchases and sales of non-current assets (Example: building and equipment purchases or sales of investments or subsidiaries.)

o Cash flow from financing activities: associated with financing the firm (Example: selling and paying off bonds and issuing stock and paying dividends)

Statement of Cash Flows
Cash Flow from Operating Activities
Net Income	XXX,XXX
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization	XX,XXX
Changes in other accounts affecting operations:
(Increase)/decrease in accounts receivable	X,XXX
(Increase)/decrease in inventories	X,XXX
(Increase)/decrease in prepaid expenses	X,XXX
Increase/(decrease) in accounts payable	X,XXX
Increase/(decrease) in taxes payable	X,XXX
Net cash provided by operating activities	XXX,XXX
Cash Flow from Investing Activities
Capital expenditures	(XXX,XXX)
Proceeds from sales of equipment	XX,XXX
Proceeds from sales of investments	XX,XXX
Investments in subsidiary	(XXX,XXX)
Net cash provided by investing activities	(XXX,XXX)
Cash Flow from Financing Activities
Payments of long-term debt	(XX,XXX)
Proceeds from issuance of long-term debt	XX,XXX
Proceeds from issuance of common stock	XXX,XXX
Dividends paid	(XX,XXX)
Purchase of treasury stock	(XX,XXX)
Net cash provided by financing activities	(XX,XXX)
Increase (Decrease) in Cash	XX,XXX