Comprehensive-Statement-of-Cash-Flows.pptx

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1. Comprehensive Statement of Cash Flows This presentation provides a comprehensive overview of the Statement of Cash Flows, a critical financial statement that provides insights into a company's cash flow activities. ML by Marlon Labado

2. Overview of Cash Flow Statement Operating Activities Cash flows from the core business activities, including sales, purchases, and expenses. Investing Activities Cash flows related to buying and selling long-term assets, such as property, plant, and equipment. Financing Activities Cash flows related to obtaining and repaying financing, including debt and equity.

3. Importance of Cash Flow Analysis Liquidity Assessment Determines a company's ability to meet short-term obligations. Financial Health Evaluation Assesses the sustainability of a company's operations. Investment Decisions Provides insight into a company's ability to generate returns on investments.

4. T wo methods of calculating cash flow: the direct method and the indirect method. Direct Method: List cash receipts: Include cash collected from customers. List cash payments: Include cash paid to suppliers, employees, interest paid, and income taxes paid. Calculate net cash flow from operating activities: Subtract total cash payments from total cash receipts. Indirect Method: Start with net income: Obtain this from the income statement. Adjust for non-cash items: Add back depreciation and amortization. Adjust for changes in working capital: Account for changes in accounts receivable, inventory, accounts payable, and other working capital accounts. Calculate net cash flow from operating activities: Combine the adjusted net income with changes in working capital.

5. Cash Flows from Operating Activities Cash Receipts From sales of goods and services, interest and dividends. Cash Payments For inventory, salaries, operating expenses, taxes.

6. Cash Flows from Investing Activities 1 Acquisitions Purchase of long-term assets, like property, plant, and equipment. 2 Sales Sale of long-term assets, resulting in cash inflows. 3 Investments Investments in other companies or securities.

7. Cash Flows from Financing Activities Debt Financing Borrowing money from lenders, issuing bonds, and taking out loans. Equity Financing Issuing stock and receiving investments from shareholders. Repayment Repayment of debt, including principal and interest.

8. Reconciling Net Income to Cash Flows 1 Net Income 2 Add Non-cash expenses. 3 Subtract Non-cash revenues. 4 Adjustments Changes in working capital. 5 Cash Flow From operating activities.

9. Interpreting Cash Flow Trends 1 Positive Healthy cash flow, ability to meet obligations, potential for growth. 2 Negative Potential liquidity issues, need for financial management, may signal challenges. 3 Stable Predictable cash flows, consistent operations, low risk profile.

10. Non-Cash Transactions and Disclosures 1 Stock-Based Compensation No cash outlay, but recorded as expense. 2 Depreciation and Amortization Non-cash expenses, reflected in operating activities. 3 Disclosures Provide clarity on key assumptions and adjustments.

11. Conclusion and Key Takeaways The Statement of Cash Flows is essential for understanding a company's financial health and ability to generate cash. Analyzing cash flow trends provides valuable insights for investors, creditors, and management.