2. Name DivRoll No Gufran Siddiqui A 53 Aabid Kalokhe a 20 Shehzad Khan A 30 Asif valsangkar a 61 Farhan Ansari a 04 Shoaib shaikh a 50 Zeeshan azmi a 06

3.  Provides information about cash inflows and outflows during an accounting period  Is developed from Balance Sheet and Income Statement data  Important as an analytical tool

4.  Accrual-based accounting requires reporting revenues when earned and expenses when incurred – not when cash is exchanged.  Explains the reasons for a change in cash.  Reconciles net income with cash flow from operations.  Valuation models used in financial analysis are often based on projections of future cash flows.

5. Four parts of a statement of cash flows:  Cash  Operating Activities  Investing Activities  Financing Activities

6.  Cash includes Cash and Cash-equivalents  Cash Equivalents Treasury bills maturing within 90 days or less. Investment Funds Foreign Currency on hand Checking Account Free Savings Account

7.  Cash flows related to selling goods and services; that is, the principle business of the firm.  The cash effects of transactions and other events that enter into the determination of income Examples of Operating Activities  Cash received from customers through sale of goods or services performed;  Cash payments to suppliers or employees  Cash payments for taxes and other expenses

8.  Acquiring/disposing of securities that are not cash equivalents  Cash flows related to the acquisition or sale of non-current assets.  Lending money/collecting on loans Examples of Investing Activities  Cash received from sales of assets that are not held for the regular trading purposes such as sale of building; marketable securities such as trading and available for sale securities, and investments  Cash payments to acquire property, plant, and equipment (PPE), other tangible or intangible assets, and other long-term assets  Cash received from sale of, and paid for purchases of derivative instruments  Loans extended to other companies and collection of such loans

9.  Borrowing from creditors/repaying the principal  Obtaining resources from owners  Providing owners with a return on investment Examples of financing activities  Cash received from issuing share capital  Cash proceeds from issuing bonds, loans, notes, mortgages and other short or long-term borrowings  Cash payments to shareholders to redeem existing shares- treasury stock  Cash repayment of loans and other borrowings; and  Cash payments to shareholders as dividends.

10. Total Inflows less Total Outflows = Change in cash for the accounting period

11. Cash received from sale of goods and services Cash received from sale of goods and services Cash paid for operating goods and services Cash paid for operating goods and services cash flow from operations cash flow from operations Operations -= Cash received from sales of investments and longterm assets Cash received from sales of investments and longterm assets Cash paid to purchase long-term investments Cash paid to purchase long-term investments cash flow from investing cash flow from investing Investing -= Cash received from issue of debt or capital stock Cash received from issue of debt or capital stock Cash paid for dividends and to repay debt or to buy treasury stock Cash paid for dividends and to repay debt or to buy treasury stock cash flow from financing cash flow from financing Financing -= Net change in cash for the period Net change in cash for the period = + or - cash inflows cash outflows

12. Firms may use one of two methods prescribed by the IASB-FASB: Direct Method Indirect Method The two methods yield identical figures for net cash flow from operating activities because the underlying accounting concepts are the same.

13. Direct Method Shows  Cash collections from customers  Interest and dividends collected  Other operating cash receipts  Cash paid to suppliers and employees  Interest paid  Taxes paid  Other operating cash payments

14. Cash Flow from Operating Activities : Direct Method Cash Flow from Operating Activities Amount (Rs.) Cash Receipts from : Sales Commission & Fees Interest Received Cash Payment for : Purchases Payments to and for employees Operating Expenses Interest Payments Direct Taxes Paid Net Cash Flow from Operating Activities XXX Amount (Rs.) XXX

15. Indirect Method starts with Net Income and adjusts for  Deferrals  Accruals  Non-cash items, such as depreciation and amortization  Non-operating items, such as gains and losses on asset sales  Reconciliation of the accrual based and cash based accounting

16. Cash Flow from Operating Activities : Indirect Method Cash Flow from Operating Activities Amount (Rs.) Amount (Rs.) Net Profit before Tax Adjustment for : Depreciation Loss on Sale of Fixed Assets Loss on revaluation Operating Profit before Working Capital Changes Adjustment* for : Trade and other Receivables Inventories or Stocks Trade Payments or (Creditors and B/P) Cash Generated from Operations Interest Paid Taxes Paid Net Cash Flow from Operating Activities xxx XXX

17. Look at changes in balance sheet accounts from beginning to end of accounting period Next Step: Transfer the account changes to the appropriate area of a statement of cash flows First First Step

18. External Uses  To assess the ability of a firm to manage cash flows  To assess the ability of a firm to generate cash through its operations  To assess the company’s ability to meet its obligations and its dividend policy  To provide information about the effectiveness of the firm to convert its revenues to cash  To provide information to estimate or anticipate the company’s need for additional financing

19. Internal uses  Along side with cash budget Cash Flow Statement is used:  To assess liquidity ▪ Determine if short-term financing is necessary  To determine dividend policy ▪ Decide to distribute; or increase or decrease  To evaluate the investment and financing decisions

20.  Non-Cash Transactions are ignored.  Not a Substitute for Income Statementt.  Not a test of Total Financial Position.  Historical in Nature.

21. Should, at a minimum cover the following areas:  Cash flow from operating activities  Cash inflows  Cash outflows

22.  Its an important analytical tool for creditors, investors and other users of financial statement data.  Firm’s ability to generate cash flows in the future  Firm’s capacity to meet cash obligations  Firm’s future external financing needs  Firm’s success in productively managing investing activities  Firm’s effectiveness in implementing financing and investing strategies

23. Generating cash from operations is the preferred method for obtaining excess cash to finance:  Capital expenditures and expansion  Repayment of debt  Payment of dividends

24. When analyzing the cash outflows, the analyst should consider the necessity of the outflow and how the outflow was financed Generally, it is best to finance short-term assets with short-term debt and long-term assets with long-term debt or issuance of stock

25. Operating Investing Financing Change Activities Activities Activities in Cash Airline $ 2,29( 1,210) 213 1,232 Computer (25) 118 1 94 Recreation 42 (26) (5) 11 Retailer 1,068 332 (53) 1,347 Semiconductor 14,823 (6,362) (9,544) (1,083) *Data from SEC website, www.sec.govwww.sec.gov