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CASHFLOW

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cash flow statement

is a financial statement that shows how changes in balancesheet and income accounts affect cash and cashequivalents, 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 INCASH FLOW

CASH LOST

CASH FLOW

CASH EQUIVALENT

INFLOWOUTFLOW

FROM OPERATIONS

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Cash Flows

Cash Inflows Cash Outflows

Incremental Revenue Initial InvestmentCost Savings Working Capital Inv.

Allowed Tax Credits Repairs & Maint.

Salvage Value Inc. Man. & Op CostsWorking Cap Releas Interest and Loan Pmt

ST & LT Loans Income Taxes

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For example, if you buy a newcompany truck, the cash outlay affects

your cash flow (because money wentout), but the truck will be set up as acapital asset on the balance sheet and

therefore won't appear on the incomestatement. It will start to hit theincome statement in small pieceswhen you depreciate it

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THE CASH FLOW

STATEMENT To identify the causes for the cashbalance changes between twodifferent time periods with the help

of two different balance sheets.

To enlist the factors of influence onthe reduction of cash balance.

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UTILITY OF CASH FLOW

STATEMENTS To identify the reasons for the

reduction or increase in the cashbalances.

It guides the management to takethe capital budgeting decisions.

It helps the management to maintain

an appropriate level of cashresources.

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 anddelivery of the company's product aswell as collecting payment from itscustomers. This could include

purchasing raw materials, buildinginventory, advertising, and shippingthe 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 orcustomers

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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 frominvestors such as banks and

shareholders, as well as the outflow ofcash to shareholders as dividends asthe company generates income.

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Financing Activities

Borrowed Amount (inflow)

Principal repayments (outflow)

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Advantages of Cash FlowStatement:

1. It helps the newly formedcompanies to know their inflow andoutflow of cash.

2. It helps the investors to judgewhether the company is financiallysound or not.

3. It helps the lenders to know the

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Disadvantages of Cash FlowStatement:

1. By itself, it cannot provide acomplete analysis of the financial

position of the firm.

2. It can be interpreted only when it is

in confirmation with other financialstatements and other analytical toolslike ratio analysis.

CASH FLOW STATEMENT FUND FLOW STATEMENT

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CASH FLOW STATEMENT FUND FLOW STATEMENT

Only cash inflow and outflow areconsidered

Increase or decrease in the workingcapital is registered

Causes and changes of cash position Causes and changes of working capitalposition

Considers only most liquid assetspertaining to cash resources; whichfosters only for very short span of

planning

Considers in general that is currentassets; the duration of the liquidity ofthe current assets are longer in

gestation than the liquid assets: whichpaves the way for the long span ofplanning

Opening and closing balances of cash

resources are considered for thepreparation

Increase or decrease in working capital

is considered but not the opening andclosing balance for preparation

The flow in the statement means real

cash flow

The flow in the statement need not be

real cash flow

TATA MOTORS 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

eprec a on an amor za on

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eprec a on an amor za onXX,XXXChanges in other accounts affecting operations:(Increase)/decrease in accounts receivable

X,XXX(Increase)/decrease in inventories

X,XXX(Increase)/decrease in prepaid expenses

X,XXXIncrease/(decrease) in accounts payableX,XXX

Increase/(decrease) in taxes payableX,XXX

Net cash provided by operating activities(XX,XXX )

Cash Flow from Investing Activities

Capital expendituresXXX,XXX

Proceeds from sales of equipmentXX,XXX

Proceeds from sales of investmentsXX,XXX

Investments in subsidiaryXXX,XXX

Net cash provided by investing activities(XX,XXX )

Cash Flow from Financing ActivitiesPayments of long-term debt

XX,XXXProceeds from issuance of long-term debt

XX,XXXProceeds from issuance of common stock

XXX,XXXDividends paid

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THANK YOU

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QUESTIONS ?