Cash Flow Analysis from Financial Books

About the cash analysis we can say that it is the lifeblood of any business. In an organization we can see many activities to get the cash from sales, debtors, sale of assets, investment etc. like this the company spend also the cash in some areas – payment to salaries, rent dividend, interest etc. Lastly, we can say that cash flow reveals the inflow and outflow of cash during a particular period.

Objectives of Cash Flow Analysis:

Meaning of Cash Flow Statement

Uses of Cash Flow Statement

Steps in Preparing Cash Flow Statement

Distinguish between Cash & Fund Flow Statement

Compute the Cash from Operations

I have already mentioned about the meaning of Cash Flow Statement that it reveals the inflow and outflow of cash during a particular period in a particular organization. From the management point of view it is also important tool of cash planning and controlling.

Main objectives of Cash Flow Statements (CFS):

To show the causes of changes in cash balance between the balance sheet dates.

To show the factors contributing to the reduction of cash balance in spite of increasing profit or decreasing profit

Now, after knowing about the CFS objectives we can discuss about the uses of CFS:

It is for explaining the reasons for low cash balance

CFS shows the major sources and uses of cash

It helps in short term financial decisions relating to liquidity

From the past year statements projections can be made for the future

It helps the management in planning the repayment of loans, credit arrangements etc

If you want to prepare CFS then use these:

Opening of accounts for non-current items

Preparation of adjusted P & L Account

Comparison of current items

Preparation of Cash Flow Statements

Cash Flow Statements Formula:

Net Profit + Decrease in Current Assets - Increase in Current Assets
Increase in Current Liabilities Decrease in Current Liabilities

A format of Cash Flow Statement:

In the summery I can say that CFS study in the chapter is not in more details but all the understanding, uses, steps and meaning are clear. For more example and definition I will let you know further.

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Re-Mortgage : take advantage of lower rate of interest

Re-Mortgage

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Personal Loan

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