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cash flow statementis a financial statement that shows how changes in balance sheet and income accounts affect cash and cash equivalents, and breaks the analysis down to operating, investing, and financing activities

CASH FLOWINFLOW CASH FROM OPERATIONS CASH FLOW CASH EQUIVALENT OUTFLOW CASH LOST CASH FLOW CASH EQUIVALENT

NET INCREASE IN CASH FLOW EXISTING CASH FLOW POSITION

Cash FlowsCash Inflows Incremental Revenue Cost Savings Allowed Tax Credits Salvage Value Working Cap Release ST & LT Loans Cash Outflows Initial Investment Working Capital Inv. Repairs & Maint. Inc. Man. & Op Costs Interest and Loan Pmt Income Taxes4

For example, if you buy a new company truck, the cash outlay affects your cash flow (because money went out), but the truck will be set up as a capital asset on the balance sheet and therefore won't appear on the income statement. It will start to hit the income statement in small pieces when you depreciate it

MOTIVES OF PREPARING THE CASH FLOW STATEMENT To identify the causes for the cash balance changes between two different time periods with the help of two different balance sheets. To enlist the factors of influence on the reduction of cash balance.

UTILITY OF CASH FLOW STATEMENTS To identify the reasons for the reduction or increase in the cash balances. It guides the management to take the capital budgeting decisions. It helps the management to maintain an appropriate level of cash resources. How much cash resources are to be raised through the external sources ?

Classification of cash flowCash flow from operating activity Cash flow from investing activity Cash flow from financing activity

OPERATING ACTIVITIESinclude the production, sales and delivery of the company's product as well as collecting payment from its customers. This could include purchasing raw materials, building inventory, advertising, and shipping the product

OPERATING ACTIVITIES Sales revenue (inflow) Cost savings (inflow) Manufacturing expenses (outflow) Interest payments (outflow) Lease expenses (outflow) Income taxes (outflow)

INVESTING ACTIVITIESPurchase of an asset (assets can be land, building, equipment, marketable securities, etc.) Loans made to suppliers or customers

INVESTING ACTIVITIESCapital investment Salvage value Working capital Working capital recovery Gains taxes (outflow) (inflow) (outflow) (inflow) (outflow)

FINANCING ACTIVITIESinclude the inflow of cash from investors such as banks and shareholders, as well as the outflow of cash to shareholders as dividends as the company generates income.

FINANCING ACTIVITIES Borrowed Amount (inflow)

Principal repayments (outflow)

ADVANTAGES OF CASH FLOW STATEMENT:1. It helps the newly formed companies to know their inflow and outflow of cash. 2. It helps the investors to judge whether the company is financially sound or not. 3. It helps the lenders to know the companys ability to repay. 4. These statements help to have an accurate analysis of the firms ability to meet its current liabilities. 5. A cash flow statement summarizes the companys cash receipts and cash payments over a period of time.

DISADVANTAGES OF CASH FLOW STATEMENT:

1. By itself, it cannot provide a complete analysis of the financial position of the firm. 2. It can be interpreted only when it is in confirmation with other financial statements and other analytical tools like ratio analysis.

CASH FLOW STATEMENT Only cash inflow and outflow are considered Causes and changes of cash position Considers only most liquid assets pertaining to cash resources; which fosters only for very short span of planning

FUND FLOW STATEMENT Increase or decrease in the working capital is registered Causes and changes of working capital position Considers in general that is current assets; the duration of the liquidity of the current assets are longer in gestation than the liquid assets: which paves the way for the long span of planning Increase or decrease in working capital is considered but not the opening and closing balance for preparation The flow in the statement need not be real cash flow

Opening and closing balances of cash resources are considered for the preparation

The flow in the statement means real cash flow

TATA MOTORS CASH FLOW STATEMENTMar '05 Mar '06 Mar '07 Mar '08 Mar '09 12 mths 12 mths 12 mths 12 mths 12 mths

Net Profit Before Tax Net Cash From Operating Activities

1236.95 1249.82

1528.88 -221.03

1913.46 2210.13

2028.92 6174.50

1001.26 1295.02

Net Cash (used in)/from Investing Activities

-956.57

-1.06

-2805.10

-5721.86

-10644.67

Net Cash (used in)/from Financing Activities

940.67

-855.27

303.58

1132.46

8104.70

Net (decrease)/increase In Cash and Cash Equivalents

1233.92

-1077.36

-291.39

1585.10

-1244.95

Opening Cash & Cash Equivalents Closing Cash & Cash Equivalents

771.12 2005.04

2196.79 1119.43

1118.15 826.76

806.21 2391.31

2386.77 1141.82

Statement of Cash Flows Cash Flow from Operating Activities Net Income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization Changes in other accounts affecting operations: (Increase)/decrease in accounts receivable (Increase)/decrease in inventories (Increase)/decrease in prepaid expenses Increase/(decrease) in accounts payable Increase/(decrease) in taxes payable Net cash provided by operating activities Cash Flow from Investing Activities Capital expenditures Proceeds from sales of equipment Proceeds from sales of investments Investments in subsidiary Net cash provided by investing activities Cash Flow from Financing Activities Payments of long-term debt Proceeds from issuance of long-term debt Proceeds from issuance of common stock Dividends paid Purchase of treasury stock Net cash provided by financing Increase (Decrease) in Cash

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THANK YOU

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