Tuesday, May 22, 2012
Cash Flow Statement
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Statement of cash flows provides information about cash flow in and out of companies, in particular, it shows the level of activity that generate and use cash. This statement is part of the financial statements, although considered less important historically than the income statement and balance sheet.
Cash flow statement is useful for revealing the existence of the cash flows that are not apparent from the results listed in the income statement. For example, spending may have been made to the items classified as assets, so that spending does not appear in the income statement, but will appear in the statement of cash flows. Because of differences in the results, it is reasonable to review the income statement and statement of cash flows together, to get a proper perspective on any difference between the reported financial results and related cash flows.
The main activities listed in the statement of cash flows is:
The main activity is the operation of production activities income of the entity. Examples of operating activities are cash receipts from the sale of goods, as well as from royalties and commissions, the amount received or paid to settle lawsuits, fines, payments to employees and suppliers, cash payments to the lender for the flowers, contributions to charity, and the settlement obligations of cessation operation of the asset.
Investment activities involving the acquisition and disposal of long-term assets. Examples of investment activity is the cash proceeds from the sale of property, sale of debt or equity instrument of another entity, and repayment of loans made to other entities. Examples of cash payments that investment activity is the purchase of fixed assets, and, and the purchase of debt or equity of another entity.
Financing activities are activities that result in changes to the amount of equity contributions and loans entities. Examples of financing activities include lending to third parties, cash receipts from sales of own shares of the entity's equity or debt issuance, the proceeds from derivative instruments, as well as cash payments to buy back shares, pay dividends, and to pay off debt.
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