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Page 1: Cash Flow Ppt

CASH FLOW

Page 2: Cash Flow Ppt

cash flow statement

is 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

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CASH FLOW

CASH

CASH FLOW

CASH EQUIVALENT

EXISTING CASH FLOW

POSITION

NET INCREASE IN CASH FLOW

CASH LOST

CASH FLOW

CASH EQUIVALENT

INFLOW OUTFLOW

FROM OPERATIONS

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Cash Flows

Cash Inflows Cash Outflows

Incremental Revenue Initial Investment

Cost Savings Working Capital Inv.

Allowed Tax Credits Repairs & Maint.

Salvage Value Inc. Man. & Op Costs

Working Cap Release Interest and Loan Pmt

ST & LT Loans Income Taxes

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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

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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.

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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 ?

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Classification of cash flow

Cash flow from operating activity

Cash flow from investing activity

Cash flow from financing activity

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Operating activities include 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

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Operating Activities

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

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Investing activities

Purchase of an asset (assets can be land, building, equipment,

marketable securities, etc.) Loans made to suppliers or

customers

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Investing Activities

• Capital investment (outflow)• Salvage value (inflow)• Working capital (outflow)• Working capital recovery (inflow)• Gains taxes (outflow)

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Financing activities

include 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.

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Financing Activities

• Borrowed Amount (inflow)

• Principal repayments (outflow)

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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 company’s ability to repay.

4. These statements help to have an accurate analysis of the firm’s ability to meet its current liabilities.

5. A cash flow statement summarizes the company’s cash receipts and cash payments over a period of time.

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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.

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CASH FLOW STATEMENT FUND FLOW STATEMENT

Only cash inflow and outflow are considered

Increase or decrease in the working capital is registered

Causes and changes of cash position Causes and changes of working capital position

Considers only most liquid assets pertaining to cash resources; which fosters only for very short span of planning

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

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

Increase or decrease in working capital is considered but not the opening and closing balance for preparation

The flow in the statement means real cash flow

The flow in the statement need not be real cash flow

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Mar '05 Mar '06 Mar '07 Mar '08 Mar '09

12 mths 12 mths 12 mths 12 mths 12 mths

Net Profit Before Tax 1236.95 1528.88 1913.46 2028.92 1001.26

Net Cash From Operating Activities 1249.82 -221.03 2210.13 6174.50 1295.02

Net Cash (used in)/fromInvesting 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 771.12 2196.79 1118.15 806.21 2386.77

Closing Cash & Cash Equivalents 2005.04 1119.43 826.76 2391.31 1141.82

TATA MOTORS CASH FLOW STATEMENT

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Statement of Cash Flows

Cash Flow from Operating Activities Net Income XXX,XXX Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization XX,XXX Changes in other accounts affecting operations: (Increase)/decrease in accounts receivable X,XXX (Increase)/decrease in inventories X,XXX (Increase)/decrease in prepaid expenses X,XXX Increase/(decrease) in accounts payable X,XXX Increase/(decrease) in taxes payable X,XXX Net cash provided by operating activities (XX,XXX )

Cash Flow from Investing Activities Capital expenditures XXX,XXX Proceeds from sales of equipment XX,XXX Proceeds from sales of investments XX,XXX Investments in subsidiary XXX,XXX Net cash provided by investing activities (XX,XXX )

Cash Flow from Financing Activities Payments of long-term debt XX,XXX Proceeds from issuance of long-term debt XX,XXX Proceeds from issuance of common stock XXX,XXX Dividends paid XX,XXX Purchase of treasury stock XX,XXX Net cash provided by financing XX,XXX Increase (Decrease) in Cash (XX,XXX)

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THANK YOU

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QUESTIONS ?


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