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Financial Reporting L9&L10 23/10/17 :<3: (cash flow statement…
Financial Reporting L9&L10 23/10/17 :<3:
cash flow statement
one resource: cash, and summarises all movements during the period
provides information on
liquidity
, viability and adaptability
reflects the importance of cash to survival
linked to basic concepts of
value
cash flow is not the same as net profit or retained income
some revenues and expenses are not realised in cash within the period
some cash movements are not fully reflected in the income statement in year of incidence
relevant to the quality of profits earned / understanding change in the business
movements are grouped according to categories
net cash flow from operating activities
cash flows from investing activities
cash flows from financing activities
= net increase or decrease in cash in the year
cash flow from operations
direct
summarise all cash inflow and outflows directly
receipts from customers
payments to suppliers
measure cash inflow from sales as total receipts from customers
indirect
start with operating profit and adjust for non-cash amounts
working from the accruals information in the income statement and balance sheet
measure cash inflow from sales as = sales revenue + opening receivables - closing receivables
GUSTAVUS