Scenic Video Transcript Direct Cash Flow Statements Topics. Introduction. Purpose of cash flow statements. Level 1 analysis: major categories

Save this PDF as:
 WORD  PNG  TXT  JPG

Size: px
Start display at page:

Download "Scenic Video Transcript Direct Cash Flow Statements Topics. Introduction. Purpose of cash flow statements. Level 1 analysis: major categories"

Transcription

1 Cash Flow Statements» What Do I See?» Direct Cash Flow Statements» Scenic Video Scenic Video Transcript Direct Cash Flow Statements Topics Introduction Purpose of cash flow statements Level 1 analysis: major categories Level 2 analysis: line items o Financing cash flows o Investing cash flows o Operating cash flows Take-aways Transcript Introduction Welcome to the Direct Cash Flow Statements Scenic Route. This video will help you understand the purpose and structure of direct cash flow statements. Most IFRS and US GAAP companies don't report direct cash flow statements even though they are encouraged to do so by standard setters. Instead, they report the indirect statements discussed in the next scenic route. This raises two questions: Why don t companies use direct statements, and of course, why should you study direct statements if they're not used much? We'll explain the reasons most companies don t use direct statements when we go behind the numbers. Why should you study direct statements even though they're not used much? Because you can learn a great deal about indirect statements by studying direct ones. In fact, direct statements provide more information about cash flows than indirect statements. This means we can gain valuable insights about what's happening behind the numbers reported in indirect cash flow statements by studying direct cash flow statements. To this end we look to Australia, the one country where many, if not most, companies report direct cash flow statements. In fact, before Australia adopted IFRS in 2005, direct cash flow statements were required. Consistent with IFRS, Australian companies are now encouraged to report direct cash flow statements, but they can also use indirect statements just as companies can around the world. We begin with the primary purpose of direct cash flow statements, which we're going to connect to balance sheets. And by the way, that's also going to be the primary purpose of indirect cash flow statements. You may translate this work into your local language, as long as you credit G. Peter & Carolyn R. Wilson and respect the Creative Commons Attribution-Noncommercial-Share Alike United States license NavAcc LLC.

2 And then we'll do a Level 1 and Level 2 analysis similar to what we do with the balance sheet in the income statement starting at the highest level with three numbers and then working our way down into the line items. As we go through the Level 2 analysis which is line items, we'll talk about three sections of the cash flow statement: financing activities, investing activities, and operating activities; and then we'll end with some takeaways. So let's get started. Purpose of cash flow statements Even though we re talking about direct cash flow statements here, we're going to begin with the balance sheet, and we're going to be looking at Qantas' balance sheet. Recall Qantas is an Australian airline. As we look at the cash account and, cash and cash equivalents that is, we see that their beginning balance of their cash was around $3.7 B, the ending balance was around $3.5 B, and it changed this by about $208 M. You'll notice we've added a column to the balance sheet relative to what the company reported so we could easily see the change, just as we did earlier for the statement of changes in owners' equity. Now the question you might be asking yourself when you're looking at a balance sheet, cash went down by $200 M, why? And that's of course similar to the question you asked when we were looking at the statement of shareholders' equity. In that case, when we looked at the equity accounts on balance sheet we saw they changed and we went to the statement of changes in owners' equity, and that explained in much more detail why it changed. Well, we're going to do the same thing with the direct cash flow statement. We're going to look at the cash flow statement to get better insights about why cash changed on the balance sheet. In fact, that's the primary purpose of the cash flow statement. So, let's do that. Now the first thing I want to point out is that we look at this direct cash flow statement for Qantas is that we ve got one column here that we're going to focus on, and that s the column for Now there were two columns on the balance sheet that corresponded to this one column on the cash flow statement. Remember, there's a beginning balance and there's an ending balance on the balance sheet. And, the cash flow statement is going to focus on the period in between just as the income statement did. So the cash flow statement, obviously, is a flow statement rather than balance sheets, which are stock statements, measured at a point in time. So we're looking at the activity that happened during the period. How did cash change during the period and why? And that means one column on the cash flow statement corresponds to two columns on the balance sheet. If you wanted to find corresponding balance sheet numbers for the year before, well, you'd have to go back and look at the balance sheet change on the balance sheets that were reported the year before. So that's an important thing to keep in mind. Students often get that confused. So let's get started here and work our way down and see what the bottom line is on the direct cash flow statement. We begin by looking for some numbers we re already familiar with. So what was the cash balance at the beginning of the year? Well, here it is right here, $3,704, $3,704, $3,704, beginning balance, and that was reported on the balance sheet. And then at the end of the year on the balance sheet was $3,496. The difference on the balance sheet was $208. 2

3 Now how does this statement give us more insights about that? Well, first of all, there's this number -$188, $188 M decrease. Now, that's not the same as the $208 decrease. And why is that? Well, it's because of foreign currency effects right here, which are $20 M more. I'll come back and explain all that, but let's first of all go back and figure out where does $188 M decrease come from? It comes from up here. That is the direct cash flow statement. All the numbers above, they net to -$188 M. And that s what the statement is doing. It s explaining the changes in cash in terms of what happened during the period with cash inflows and outflows, and we ll see that in just a second. What about this $20 M? What does it do? Well, the $188 M is really cash flows. Now, what does that mean? Well, you know what cash flows are. If you spend money to pay your electric bill, well that s a cash outflow. If someone gives you cash, perhaps an employer, well that s a cash inflow. So the $188 M is all going to be inflows or outflows, and you can see that right here. Inflows are positive numbers; outflows are negative numbers. What about this $20 M that has to do with foreign exchange rates? Well, that number is a little different. You see, cash didn t actually flow in that situation but rather Qantas has operations in other countries. And because it has operations in other countries, it deals in foreign currencies in other countries. Well, the cash balances at the end of the year have to be translated into Australian dollars because that s the way they re reporting their numbers. And when they do that translation, there can be exchange rate differences between the currency they re translating from to the Australian dollar, and that gives rise to these exchange rate adjustments to the cash account. Otherwise, it wouldn t balance in Australian dollars. Now, you need not worry about that at this point. You just need to know that if you want to explain the entire change on the balance sheet, well part of that is going to be due to currency exchanges and part of that to cash flows in and out of the company. And that s where our focus is going to be primarily going forward. Level 1 analysis: major categories Now, let s break down that $188 M and get more insights about it. And we'll do that, first of all, with a Level 1 analysis. When you first look at a cash flow statement, you ought to look down at the bottom, and sometimes, by the way, these beginning balances and any balances are in different places on the statement and say, well how much did it change? And then try to break it down and get to this $188 M and say, well, that s what I d like to get more insights about. And, the very first thing you want to do is, say, there's three numbers I want to look at that go into that $188 M. And, the first number is cash from operations. Now, we ll be breaking down operations in just a minute, but for right now it s kind of intuitive. Operations has to do with things that happen frequently over and over again in the business and they tend to happen within an operating cycle. So we got $1.8 B for Qantas coming in from operations. And if we look at the net cash from investing activities, it s around $2.5 B. Now, notice that s a net cash flow. Some cash went out, some cash came in, but on net it was around $2.5 B. And we will be looking at these cash flows in detail in just a minute. So what are investing cash flows? Well, that s buying long-term assets or something like that. So here is what we have so far. From operations, Qantas generates $1.8 B roughly, and 3

4 they ve used about $2.5 B to grow the business going forward. Now, where are they getting the money from? Well, then we look in the financing activities. We see from their financing activities they generated $508 M. Now, what are financing activities? Again, we ll look at it more in detail shortly, but for right now financing activities are just shareholders giving cash to the company or getting cash from the company, debt holders giving cash to the company or getting cash from the company. So what do we have so far? We see if you add those numbers up mathematically, you get the -$188 M. Now, you can t end up with -$188 M of cash, so the cash balance had to decrease by that amount. Of course, that s ignoring the foreign currency effects which we will ignore going forward because it s largely outside the scope of this chapter. Let s see if we can get some more insights about these three different types of cash flows. Level 2 analysis: line items Financing cash flows We begin with financing cash flows. And the reason we start with financing rather than operating, by the way, is operating cash flows, as we will see, are defined to be everything else when you have defined investing and financing cash flows. And there s another reason. When a company starts its business, well it starts with financing cash flows. You have to go out and raise some money before you can buy property, plant and equipment, for example, and before you can start operating that property, plant and and equipment. So it's kind of logical to start with financing even though it s typically at the bottom of the cash flow statement. There s a formal definition here, but I d rather we focus on the examples to give you some insights and then look at the line items that are reported. What do we tend to find when we look at the financing section of a direct cash flow statement which, by the way, is the same as an indirect cash flow statement as we ll see shortly. Well, first of all, all transactions with owners in their role as owners, so we re talking about events that we ve looked at in the past like issuing stock, buying back stock, paying dividends. Those are the big transactions with owners, all those cash flows go in the financing section. Now, what about debt holders? Well, under US GAAP, all cash transactions with debt holders except interest payments are classified as financing activities. Interest payments under US GAAP are classified as operating cash flows. Now, what about IFRS? Under IFRS, all transactions with debt holders can be classified as financing activities, but they have the option of putting interest, like US GAAP companies, up in the operating section. Let s look at some line items in the financing section of Qantas' cash flow statement. We see Payments for treasury shares. Now, what are treasury shares? This is basically a stock repurchase, so the company buying back its shares. So when you buy back your own shares, we say you have treasury shares. Now, here is the key thing we want you to know at this point, it's a cash outflow. So Qantas spends $65 M to buy back some of its shares. What about Proceeds from borrowings? Well, proceeds means cash received. So how much cash did Qantas receive when it borrowed money from debt holders? Well, $1.4 B roughly. And then how much did they repay in principal for borrowings? $784 M. 4

5 So look at the signs and they make logical sense, and that is why it s called a direct cash flow statement because when cash is coming in, when you borrow money, well it's positive. And when it's going out, it's negative. And, this is a really important thing to see right up front. And, the other thing to see is once we explain some of what these words mean, they re kind of logical. Once we know what proceeds are, we can think of, oh, that's money coming in because we went and got money from a debt holder just like you would get money from, say, a bank to go to college. Now, here we have (Payments)/ proceeds from swaps. Well, that one is out of bounds, okay. We won t worry about that, but look it's only a million dollars. And then we get the Net receipts from aircraft security deposits, and that's not even there for this year. And then Dividends paid to non-controlling interests. So they didn t pay dividends to their controlling interest shareholders, their major shareholders, but they did do a non-controlling interest and again it's a small number. So the big numbers focus on the big issues we talked about up here -- transactions with shareholders, transactions with debt holders, and those transactions primarily with debt holders and share holders that involve issuing shares, repurchasing shares, issuing debt, paying off debt, or things like that. We also noticed right away that their interest is not here because they have interest on their debt, and they have not included it in their financing activities. So we'll find it up in the operating activities, which again is an option they have. The key takeaway here is that financing activities are really intuitive once you get the hang of them, and they tend to look fairly similar across companies except for synonyms. Sometimes you have to worry about companies describing the same thing differently. Investing cash flows Now, let s look at the investing section of the cash flow statement, and again some examples will help us out tremendously here. Investing generally deals with buying or selling long-term assets. So buying property, plant and equipment or selling it, buying a business with cash or selling one for cash, buying financial assets with cash or selling them for cash. And this is the one exception to the long-term assets because if you, for example, buy US government bonds, often those will be classified as investing activities because you are buying securities, but they might be classified on your balance sheet as current rather than non-current. So most investing activities center on long-term assets, buying or selling them, but securities which are foremost financial assets are current and yet are classified often as investing activities. So let s look at some of these. Payments for property, plant and equipment, and again notice $2.4 B going out. Interest paid and capitalized on qualifying assets, well, that s one we don t want you to worry about right now. And then we have, Proceeds from disposal of property, plant and equipment; proceeds, that s cash received, so they got $86 M; Proceeds from the sale and leaseback of non-current assets, $30 M, and that means they sold an asset and then turn around and leased it back. So when they sold it they got $30 M for it. And we could go on. Most of these are fairly logical. Sometimes you have to understand the underlying business issues, but once you understand the underlying business issues and the vocabulary, they are straightforward. Operating cash flows Now we turn to operating cash flows. It s basically everything else that wasn't included in financing and investing. And some of these things make sense we think about what 5

6 operations are. We tend to think of Customers' collections. So Qantas collecting cash from people who are flying the airlines or from delivering freight for other parties, Payments to resource providers, like paying employees, for example. But we generally don t think of Income tax payments as having to do with operations, but they are considered part of operations because they don t fit into investing and financing. And then here we have Interest and dividends received. And again, we don t typically think of that as operations. Certainly, interest income on the income statement is generally not classified as an operating event, and that is an important distinction to understand. Often, events that deal with operations on the income statement are not classified the same on the cash flow statement. When you re classifying cash flows, they fall under these three categories and they ve been very clearly classified by the standard setters. The same is not true for the income statement in general and there is some inconsistency there. So just have a heads up on that. And then we see Interest paid. As we indicated earlier, that s an option and Qantas chose to put it up here. So if we look at this, we see cash receipts in the course of operations, $15 B; cash payments in the course of operations, $13,727. Some companies would break this down into cash paid to employees, cash paid to suppliers, whatever. But this is all a company really has to do under the direct statement -- interest received, interest paid, dividends received, income tax refunds. So they didn t pay taxes. They actually got a refund this year. And then importantly, the net cash is going to be $1,782. Now, when you look at the net cash, it s obviously a much smaller number because we net the large numbers with the small numbers, positives and negatives, and that s the number we re going to see on the indirect cash flow statement later. And what s really important about direct cash flow statements is that you learn to look at all these components that are in operations and get an intuitive feel for what s behind net cash from operations because when we get to the indirect, as the name suggests, you re not going to see these numbers up here but they re still going to be going into net cash from operating activities, which you will get to see on an indirect statement. That s just a little preview for you. Take-aways So what should you take away by now? Well, first of all and most importantly, how the cash flow statement tends to work. At Level 1 analysis, what do we see? Well, we see that if we take operating cash flows and add mathematically, that is taking into account the negative sign, the investing cash flows, and add the financing cash flows, we get the change in cash related to inflows and outflows. And then we have to adjust for foreign currency at the end of the year, which don t relate to cash going in or out but just the way we value the cash as we convert it from a foreign currency. And that gets us to the change in the balance sheet, and that s the purpose of the statement. And then we can drill down deeper into the line items. So where are we heading? Well, IFRS encourages companies to report direct cash flow statements. Most companies report the indirect cash flow statement studied in the next scenic route. That s interesting, right? Not only IFRS, by the way, but US GAAP companies both encourage direct statements. Yet, most companies use indirect statements. Except for their operating sections, direct and indirect cash flow statements are identical. The operating sections of indirect cash flow statements explain why income differs from cash from operations, reconcile, explains, and that s going to be our big focus when we go to the next scenic route and the large part of what we do when we go behind the numbers. 6

7 7 Most of the reported line items explain differences in net income and net cash from operations on indirect statements, and they re not cash flows. And that surprises students when they first look at it. It s called a cash flow statement. Yet, when we look at these reconciling items that explain why income difference from cash, generally those aren t cash flows. You ll understand that when we go behind the numbers. This contrasts with direct cash flow statements where all line items are cash flows. So everything we looked at so far is a cash flow. Companies that report direct cash flow statements, like in Australia, typically reconcile net income to net cash from operations in their footnotes. So they essentially do an indirect statement anyway. It s going to be really important that we understand the indirect statement, but it was also important that we start it with the direct to give you some insights that are going to be behind the numbers when we look at the indirect statement that we're not going to get to see. Well, I hope you enjoyed this video. See you next time.

What Do I See on Cash Flow Statements?

What Do I See on Cash Flow Statements? Cash Flow Statements» What Do I See on Cash Flow Statements» Learning Objectives and Key Take-aways www.navigatingaccounting.com What Do I See on Cash Flow Statements? L E A R N I N G O B J E C T I V E

More information

Equity Value, Enterprise Value & Valuation Multiples: Why You Add and Subtract Different Items When Calculating Enterprise Value

Equity Value, Enterprise Value & Valuation Multiples: Why You Add and Subtract Different Items When Calculating Enterprise Value Equity Value, Enterprise Value & Valuation Multiples: Why You Add and Subtract Different Items When Calculating Enterprise Value Hello and welcome to our next tutorial video here. In this lesson we're

More information

how to prepare a cash flow statement

how to prepare a cash flow statement business builder 4 how to prepare a cash flow statement zions business resource center zions business resource center 2 how to prepare a cash flow statement A cash flow statement is important to your business

More information

STATEMENT OF CHANGES IN FINANCIAL POSITION

STATEMENT OF CHANGES IN FINANCIAL POSITION Home Page - Statement of Changes in Financial Position STATEMENT OF CHANGES IN FINANCIAL POSITION by Dr. J. Herbert Smith/ACOA Chair Technology Management and Entrepreneurship Faculty of Engineering University

More information

CASH FLOW STATEMENT (AND FINANCIAL STATEMENT)

CASH FLOW STATEMENT (AND FINANCIAL STATEMENT) CASH FLOW STATEMENT (AND FINANCIAL STATEMENT) - At the most fundamental level, firms do two different things: (i) They generate cash (ii) They spend it. Cash is generated by selling a product, an asset

More information

Chapter 6 The cash flow statement

Chapter 6 The cash flow statement Chapter 6 The cash flow statement The last four chapters have been spent looking at the balance sheet and income statement and how to use them. In this chapter, we will move on to arguably the most revealing

More information

foreign risk and its relevant to acca qualification paper F9

foreign risk and its relevant to acca qualification paper F9 01 technical foreign risk and its relevant to acca qualification paper F9 Increasingly, many businesses have dealings in foreign currencies and, unless exchange rates are fixed with respect to one another,

More information

Consolidated balance sheet

Consolidated balance sheet 83 Consolidated balance sheet December 31 Non-current assets Goodwill 14 675.1 978.4 Other intangible assets 14 317.4 303.8 Property, plant, and equipment 15 530.7 492.0 Investment in associates 16 2.5

More information

Chapter 21 The Statement of Cash Flows Revisited

Chapter 21 The Statement of Cash Flows Revisited Chapter 21 The Statement of Cash Flows Revisited AACSB assurance of learning standards in accounting and business education require documentation of outcomes assessment. Although schools, departments,

More information

Chapter 14. 1 Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall.

Chapter 14. 1 Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall. Chapter 14 1 Identify the purposes of the statement of cash flows Distinguish among operating, investing, and financing cash flows Prepare the statement of cash flows by the indirect method Identify noncash

More information

International Financial Reporting Standards (IFRS)

International Financial Reporting Standards (IFRS) FACT SHEET September 2011 IAS 7 Statement of Cash Flows (This fact sheet is based on the standard as at 1 January 2010.) Important note: This fact sheet is based on the requirements of the International

More information

Infrastructure Finance Prof. A. Thillai Rajan Department of Management Studies Indian Institute of Technology, Madras

Infrastructure Finance Prof. A. Thillai Rajan Department of Management Studies Indian Institute of Technology, Madras Infrastructure Finance Prof. A. Thillai Rajan Department of Management Studies Indian Institute of Technology, Madras Lecture - 6 Basic Financial Management - Part IV Hi welcome back to this course on

More information

Cash flows Part I: Understanding the cash flow statement

Cash flows Part I: Understanding the cash flow statement Cash flows Part I: Understanding the cash flow statement Courtney Clowes Director e: courtney@keq.com.au w: www.keq.com.au KnowledgEquity 2014 Introduction You may be making a profit that is a great start.

More information

13:11. Statement of Cash Flows. Chapter. Illustration. Statement of Cash Flows- summary. Overview

13:11. Statement of Cash Flows. Chapter. Illustration. Statement of Cash Flows- summary. Overview Overview Statement of Cash Flows Chapter 23 BECAUSE of the SCF, users of the financial statements get the best of both worlds! SCF bridges the gap created by paper income resulting from applying an accrual

More information

Cash is King. cash flow is less likely to be affected

Cash is King. cash flow is less likely to be affected Reading 27: Understanding Cash Flow Statements Relevance of Cash Flow The primary purpose of the statement of cash flows (SCF) is to provide: Info about a firm s cash receipts & cash payments during an

More information

Cash Flow Statement. Introduction. Introd. Contd. Chapter 4

Cash Flow Statement. Introduction. Introd. Contd. Chapter 4 Cash Flow Statement Chapter 4 Introduction Management and other interested external parties have always recognized the need for a cash flow statement but it was never required until the FASB (Financial

More information

CHAPTER 4. FINANCIAL STATEMENTS

CHAPTER 4. FINANCIAL STATEMENTS CHAPTER 4. FINANCIAL STATEMENTS Accounting standards require statements that show the financial position, earnings, cash flows, and investment (distribution) by (to) owners. These measurements are reported,

More information

Understanding Cash Flow Statements

Understanding Cash Flow Statements Understanding Cash Flow Statements 2014 Level I Financial Reporting and Analysis IFT Notes for the CFA exam Contents 1. Introduction... 3 2. Components and Format of the Cash Flow Statement... 3 3. The

More information

ACER INCORPORATED AND SUBSIDIARIES. Consolidated Balance Sheets

ACER INCORPORATED AND SUBSIDIARIES. Consolidated Balance Sheets Consolidated Balance Sheets June 30, 2015, December 31, 2014, and (June 30, 2015 and 2014 are reviewed, not audited) Assets 2015.6.30 2014.12.31 2014.6.30 Current assets: Cash and cash equivalents $ 36,400,657

More information

Reporting and Analyzing Cash Flows QUESTIONS

Reporting and Analyzing Cash Flows QUESTIONS Chapter 12 Reporting and Analyzing Cash Flows QUESTIONS 1. The purpose of the cash flow statement is to report all major cash receipts (inflows) and cash payments (outflows) during a period. It helps users

More information

Statement of Cash Flows: Reporting and Analysis

Statement of Cash Flows: Reporting and Analysis Statement of Cash Flows: Reporting and Analysis Statement of Cash Flows: Reporting and Analysis Copyright 2014 by DELTACPE LLC All rights reserved. No part of this course may be reproduced in any form

More information

Indian Accounting Standard (Ind AS) 7 Statement of Cash Flows

Indian Accounting Standard (Ind AS) 7 Statement of Cash Flows Contents Indian Accounting Standard (Ind AS) 7 Statement of Cash Flows Paragraphs OBJECTIVE SCOPE 1 3 BENEFITS OF CASH FLOW INFORMATION 4 5 DEFINITIONS 6 9 Cash and cash equivalents 7 9 PRESENTATION OF

More information

FINANCIAL ACCOUNTING WEEK 12 STATEMENT OF CASH FLOWS. A. Understand the basic structure and format of the statement of cash flows.

FINANCIAL ACCOUNTING WEEK 12 STATEMENT OF CASH FLOWS. A. Understand the basic structure and format of the statement of cash flows. FINANCIAL ACCOUNTING WEEK 12 STATEMENT OF CASH FLOWS I. LEARNING OBJECTIVES - STATEMENT OF CASH FLOWS A. Understand the basic structure and format of the statement of cash flows. B. Distinguish cash flows

More information

International Accounting Standard 7 Statement of cash flows *

International Accounting Standard 7 Statement of cash flows * International Accounting Standard 7 Statement of cash flows * Objective Information about the cash flows of an entity is useful in providing users of financial statements with a basis to assess the ability

More information

Section A: Questions On Fill In The Blanks

Section A: Questions On Fill In The Blanks Section A : 26 FILL IN THE BLANK Section B : 10 TRUE OR FALSE QUESTIONS Section C : 11 Multiple Choice Questions Section A: Questions Fill In The Blanks the right column please insert the items from which

More information

NEPAL ACCOUNTING STANDARDS ON CASH FLOW STATEMENTS

NEPAL ACCOUNTING STANDARDS ON CASH FLOW STATEMENTS NAS 03 NEPAL ACCOUNTING STANDARDS ON CASH FLOW STATEMENTS CONTENTS Paragraphs OBJECTIVE SCOPE 1-3 BENEFITS OF CASH FLOWS INFORMATION 4-5 DEFINITIONS 6-9 Cash and cash equivalents 7-9 PRESENTATION OF A

More information

Consolidated Balance Sheets

Consolidated Balance Sheets Consolidated Balance Sheets March 31 2015 2014 2015 Assets: Current assets Cash and cash equivalents 726,888 604,571 $ 6,057,400 Marketable securities 19,033 16,635 158,608 Notes and accounts receivable:

More information

Double-Entry Bookkeeping: Assets and Liabilities

Double-Entry Bookkeeping: Assets and Liabilities Double-Entry Bookkeeping: Assets and Liabilities The purpose of this chapter is to introduce the fundamentals of double-entry bookkeeping and its role in accounting for business. The objectives of accounting

More information

IFRS brings a radical change to financial statement presentation

IFRS brings a radical change to financial statement presentation IFRS brings a radical change to financial statement presentation CMA MANAGEMENT 28 February 2009 Imagine having a balance sheet that doesn t look like it balances. If there is one thing that accountants

More information

What Do I See on Statements of Changes in Owners Equity?

What Do I See on Statements of Changes in Owners Equity? Income Statements» What Do I See on Statements of s Owners?» Learng Objectives and Key Takeaways www.navigatgaccountg.com What Do I See on Statements of s Owners? L E A R N I N G O B J E C T I V E S After

More information

Cross Check. A Study of Qantas Financial Health. Almotairi Adhikari Saputro Vannadeth

Cross Check. A Study of Qantas Financial Health. Almotairi Adhikari Saputro Vannadeth Cross Check A Study of Qantas Financial Health Almotairi Adhikari Saputro Vannadeth 1 Financial Analysis of Qantas Airlines With Virgin Australia as benchmark (for the year 2011) Hamoud Almotairi Indra

More information

Cash Flow. Summary. Cash Flow. Louise Söderberg, 2010-10-15

Cash Flow. Summary. Cash Flow. Louise Söderberg, 2010-10-15 Cash Flow Louise Söderberg, 2010-10-15 Summary The statement of cash flow reports the cash generated and used during the time interval specified in its headings. A cash flow analysis is a method of checking

More information

Fuqua School of Business, Duke University ACCOUNTG 510: Foundations of Financial Accounting

Fuqua School of Business, Duke University ACCOUNTG 510: Foundations of Financial Accounting Fuqua School of Business, Duke University ACCOUNTG 510: Foundations of Financial Accounting Lecture Note: Financial Statement Basics, Transaction Recording, and Terminology I. The Financial Reporting Package

More information

Deloitte GAAP 2014: FRS 102 - Volume B (UK Series)

Deloitte GAAP 2014: FRS 102 - Volume B (UK Series) Deloitte GAAP 2014: UK Reporting - FRS 102 - Volume B (UK Series) Chapter B7: Free postage when you order online www.lexisnexis.co.uk/store or call 0845 370 1234 B7 Contents 1 Introduction 211 2 Scope

More information

Accounting and Reporting Policy FRS 102. Staff Education Note 1 Cash flow statements

Accounting and Reporting Policy FRS 102. Staff Education Note 1 Cash flow statements Staff Education Note 1: Cash flow Statements Accounting and Reporting Policy FRS 102 Staff Education Note 1 Cash flow statements Disclaimer This Education Note has been prepared by FRC staff for the convenience

More information

The Income Statement and Statement of Cash Flows

The Income Statement and Statement of Cash Flows THE STATEMENT OF CASH FLOWS Purpose of the Statement of Cash Flows The purpose of the statement of cash flows is to identify the sources and uses of cash and the change in cash from the beginning to the

More information

Consolidated Statement of Profit or Loss

Consolidated Statement of Profit or Loss Consolidated Statement of Profit or Loss Sales: Products 864,699 1,041,794 $ 10,114,505 Post sales and rentals 941,610 1,064,555 10,335,485 Other revenue 79,686 89,347 867,447 Total sales 1,885,995 2,195,696

More information

ACC 255 FINAL EXAM REVIEW PACKET (NEW MATERIAL)

ACC 255 FINAL EXAM REVIEW PACKET (NEW MATERIAL) Page 1 ACC 255 FINAL EXAM REVIEW PACKET (NEW MATERIAL) Complete these sample exam problems/objective questions and check your answers with the solutions at the end of the review file and identify where

More information

THEME: CASH FLOW. By John W. Day, MBA

THEME: CASH FLOW. By John W. Day, MBA THEME: CASH FLOW By John W. Day, MBA ACCOUNTING TERM: Cash Flow Cash flow is the difference between the cash in and cash out of a business during an accounting period. Stated differently, it is the amount

More information

Asian Journal of Empirical Research

Asian Journal of Empirical Research . Asian Journal of Empirical Research journal homepage: http://aessweb.com/journal-detail.php?id=5004 AN OVERVIEW OF FOREIGN CURRENCY EXPOSURE Peter HARRIS 1 Simran KAUR 2 ABSTRACT Foreign exchange exposure

More information

CASH FLOW STATEMENT. On the statement, cash flows are segregated based on source:

CASH FLOW STATEMENT. On the statement, cash flows are segregated based on source: CASH FLOW STATEMENT On the statement, cash flows are segregated based on source: Operating activities: involve the cash effects of transactions that enter into the determination of net income. Investing

More information

Chapter. Statement of Cash Flows For Single Company

Chapter. Statement of Cash Flows For Single Company Chapter 4 Statement of Cash Flows For Single Company 4.1 Single company statement of cash flows Statement of cash flows are primary financial statements and are required along side the income statement

More information

Financial Statements

Financial Statements Financial Statements The financial information forms the basis of financial planning, analysis & decision making for an organization or an individual. Financial information is needed to predict, compare

More information

How to Prepare a Cash Flow Statement

How to Prepare a Cash Flow Statement How to Prepare a Cash Flow Statement Peoples Bank Business Resource Center Business Builder 4 peoplesbancorp.com 800.374.6123 Table of Contents What to Expect... 4 What You Should Know Before Getting

More information

ČEZ, a. s. BALANCE SHEET in accordance with IFRS as of June 30, 2014 in CZK Millions

ČEZ, a. s. BALANCE SHEET in accordance with IFRS as of June 30, 2014 in CZK Millions BALANCE SHEET Assets Property, plant and equipment: 30. 6. 2014 31. 12. 2013 Plant in service 319 440 319 081 Less accumulated provision for depreciation (188 197) (182 282) Net plant in service 131 243

More information

7 Secrets To Websites That Sell. By Alex Nelson

7 Secrets To Websites That Sell. By Alex Nelson 7 Secrets To Websites That Sell By Alex Nelson Website Secret #1 Create a Direct Response Website Did you know there are two different types of websites? It s true. There are branding websites and there

More information

1. Operating, Investment and Financial Cash Flows

1. Operating, Investment and Financial Cash Flows 1. Operating, Investment and Financial Cash Flows Solutions Problem 1 During 2005, Myears Oil Co. had gross sales of $1 000,000, cost of goods sold of $400,000, and general and selling expenses of $300,000.

More information

In this chapter, we build on the basic knowledge of how businesses

In this chapter, we build on the basic knowledge of how businesses 03-Seidman.qxd 5/15/04 11:52 AM Page 41 3 An Introduction to Business Financial Statements In this chapter, we build on the basic knowledge of how businesses are financed by looking at how firms organize

More information

Sri Lanka Accounting Standard-LKAS 7. Statement of Cash Flows

Sri Lanka Accounting Standard-LKAS 7. Statement of Cash Flows Sri Lanka Accounting Standard-LKAS 7 Statement of Cash Flows CONTENTS SRI LANKA ACCOUNTING STANDARD-LKAS 7 STATEMENT OF CASH FLOWS paragraphs OBJECTIVE SCOPE 1 3 BENEFITS OF CASH FLOW INFORMATION 4 5 DEFINITIONS

More information

Cash Flow Statements

Cash Flow Statements Compiled Accounting Standard AASB 107 Cash Flow Statements This compiled Standard applies to annual reporting periods beginning on or after 1 July 2007. Early application is permitted. It incorporates

More information

Consolidated Statements of Profit or Loss Ricoh Company, Ltd. and Consolidated Subsidiaries For the Years Ended March 31, 2014 and 2015

Consolidated Statements of Profit or Loss Ricoh Company, Ltd. and Consolidated Subsidiaries For the Years Ended March 31, 2014 and 2015 Consolidated Statements of Profit or Loss Sales: Products 1,041,794 1,071,446 8,928,717 Post sales and rentals 1,064,555 1,068,678 8,905,650 Other revenue 89,347 91,818 765,150 Total sales 2,195,696 2,231,942

More information

Double Entry Accounting Workbook. Erin Lawlor

Double Entry Accounting Workbook. Erin Lawlor Double Entry Accounting Workbook Erin Lawlor Double Entry Accounting Workbook Table of Contents Introduction... 2 Financial Statement Introduction... 3 Financial Transactions... 4 Debits and Credits...

More information

Club Accounts. 2011 Question 6.

Club Accounts. 2011 Question 6. Club Accounts. 2011 Question 6. Anyone familiar with Farm Accounts or Service Firms (notes for both topics are back on the webpage you found this on), will have no trouble with Club Accounts. Essentially

More information

rv.wbn.rec.020 Recording entries using company disclosures, determining their financial-statement effects and analyzing related risks (HP)

rv.wbn.rec.020 Recording entries using company disclosures, determining their financial-statement effects and analyzing related risks (HP) Revenue and Related Balance Sheet Concepts» What s Behind the numbers» Receivables» Exercises www.navigatingaccounting.com EXERCISES rv.wbn.rec.020 Recording entries using company disclosures, determining

More information

Accounting II Count Harder. Where do the Numbers Come From?? Professor Ray Wilson & edited by Professor Nelia Newell for Summer 2013 SM299

Accounting II Count Harder. Where do the Numbers Come From?? Professor Ray Wilson & edited by Professor Nelia Newell for Summer 2013 SM299 Accounting II Count Harder Where do the Numbers Come From?? Professor Ray Wilson & edited by Professor Nelia Newell for Summer 2013 SM299 Financial Statements Track All Activities of the Business Operating:

More information

Financial ratio analysis

Financial ratio analysis Financial ratio analysis A reading prepared by Pamela Peterson Drake O U T L I N E 1. Introduction 2. Liquidity ratios 3. Profitability ratios and activity ratios 4. Financial leverage ratios 5. Shareholder

More information

Understanding Accounting Reports. www.brightpearl.com

Understanding Accounting Reports. www.brightpearl.com Understanding Accounting Reports Whats inside You ll often hear the term management accounts - but how often do you use this information to actually manage your business on a day to day basis? It may well

More information

COMPONENTS OF THE STATEMENT OF CASH FLOWS

COMPONENTS OF THE STATEMENT OF CASH FLOWS ILLUSTRATION 24-1 OPERATING, INVESTING, AND FINANCING ACTIVITIES COMPONENTS OF THE STATEMENT OF CASH FLOWS CASH FLOWS FROM OPERATING ACTIVITIES + Sales and Service Revenue Received Cost of Sales Paid Selling

More information

This week its Accounting and Beyond

This week its Accounting and Beyond This week its Accounting and Beyond Monday Morning Session Introduction/Accounting Cycle Afternoon Session Tuesday The Balance Sheet Wednesday The Income Statement The Cash Flow Statement Thursday Tools

More information

FINANCIAL SUMMARY. (All financial information has been prepared in accordance with U.S. generally accepted accounting principles)

FINANCIAL SUMMARY. (All financial information has been prepared in accordance with U.S. generally accepted accounting principles) FINANCIAL SUMMARY FY2015 First Quarter (April 1, 2014 through June 30, 2014) English translation from the original Japanese-language document TOYOTA MOTOR CORPORATION FY2015 First Quarter Consolidated

More information

1 CONSOLIDATED FINANCIAL STATEMENTS (1) Consolidated Balance Sheets

1 CONSOLIDATED FINANCIAL STATEMENTS (1) Consolidated Balance Sheets 1 CONSOLIDATED FINANCIAL STATEMENTS (1) Consolidated Balance Sheets As of March 31,2014 As of March 31,2015 Assets Cash and due from banks 478,425 339,266 Call loans and bills bought 23,088 58,740 Monetary

More information

Statement of Cash Flow

Statement of Cash Flow Management Accounting 337 Statement of Cash Flow Cash is obviously an important asset to all, both individually and in business. A shortage or lack of cash may mean an inability to purchase needed inventory

More information

THE STATEMENT OF CASH FLOWS

THE STATEMENT OF CASH FLOWS THE STATEMENT OF CASH FLOWS Associate Professor PhD Cernusca Lucian University Aurel Vlaicu of Arad, luciancernusca_ro@yahoo.com Professor PhD Mates Dorel, West University of Timisoara Abstract: In today

More information

Measuring and Evaluating Cash Flow

Measuring and Evaluating Cash Flow CHAPTER FOUR 4 Measuring and Evaluating Cash Flow For information on this topic, please visit the online tutorial at www.gibbins6e.nelson.com 4.1 Chapter Introduction: Measuring and Evaluating Cash Flow

More information

Chapter 6 Statement of Cash Flows

Chapter 6 Statement of Cash Flows Chapter 6 Statement of Cash Flows The Statement of Cash Flows describes the cash inflows and outflows for the firm based upon three categories of activities. Operating Activities: Generally include transactions

More information

Statement of Cash Flows

Statement of Cash Flows THE CONTENT AND VALUE OF THE STATEMENT OF CASH FLOWS The cash flow statement reconciles beginning and ending cash by presenting the cash receipts and cash disbursements of an enterprise for an accounting

More information

Savings and Bank Accounts

Savings and Bank Accounts LESSON 2 Savings Savings and Bank Accounts Quick Write Suppose a relative gives you a generous gift of $1,000 for your sixteenth birthday. Your parent or guardian says that you can spend $50 on things

More information

Planning your cash flow

Planning your cash flow Planning your cash flow Business Coach series Preparing the cash flow forecast Keeping on track Business Coach series The cash flow process The situation Money goes out earlier and faster than it comes

More information

Statement of Cash Flows

Statement of Cash Flows STATUTORY BOARD FINANCIAL REPORTING STANDARD SB-FRS 7 Statement of Cash Flows This version of SB-FRS 7 does not include amendments that are effective for annual periods beginning after 1 January 2014.

More information

Financial Ratios and Quality Indicators

Financial Ratios and Quality Indicators Financial Ratios and Quality Indicators From U.S. Small Business Administration Online Women's Business Center If you monitor the ratios on a regular basis you'll gain insight into how effectively you

More information

IFRS IN PRACTICE. IAS 7 Statement of Cash Flows

IFRS IN PRACTICE. IAS 7 Statement of Cash Flows IFRS IN PRACTICE IAS 7 Statement of Cash Flows 2 IFRS IN PRACTICE - IAS 7 STATEMENT OF CASH FLOWS TABLE OF CONTENTS 1. Introduction 3 2. Definition of cash and cash equivalents 4 2.1. Demand deposits 4

More information

Sell Your House in DAYS Instead of Months

Sell Your House in DAYS Instead of Months Sell Your House in DAYS Instead of Months No Agents No Fees No Commissions No Hassle Learn the secret of selling your house in days instead of months If you re trying to sell your house, you may not have

More information

Rubicor Group Limited and Controlled Entities

Rubicor Group Limited and Controlled Entities Consolidated Statement of Profit or Loss and Other Comprehensive Income For the financial year ended 30 June Note Revenue 2 204,314 198,028 Other gains and losses 2 403 - Gain on debt forgiven 3-88,608

More information

International Financial Accounting (IFA)

International Financial Accounting (IFA) International Financial Accounting (IFA) Preparation and presentation of Financial Statements DEPARTMENT OF BUSINESS AND LAW ROBERTO DI PIETRA SIENA, NOVEMBER 4, 2013 1 INTERNATIONAL FINANCIAL ACCOUNTING

More information

Statement of Cash Flows

Statement of Cash Flows HKAS 7 Revised February November 2014 Hong Kong Accounting Standard 7 Statement of Cash Flows HKAS 7 COPYRIGHT Copyright 2014 Hong Kong Institute of Certified Public Accountants This Hong Kong Financial

More information

The Statement of Cash Flows

The Statement of Cash Flows CHAPTER The Statement of Cash Flows OBJECTIVES After careful study of this chapter, you will be able to: 1. Define operating, investing, and financing activities. 2. Know the categories of inflows and

More information

How Banks Create Money: The Balance Sheets Contents

How Banks Create Money: The Balance Sheets Contents How Banks Create Money: The Balance Sheets Contents 1. The different types of money 2. A quick word on balance sheets 3. How central banks create money 1. Central bank reserves 2. Cash 4. How commercial

More information

For personal use only

For personal use only Rule 4.7B Quarterly report for entities admitted on the basis of commitments Name of entity Cordlife Ltd ABN Quarter ended ( current quarter ) 48 108 051 529 30 June 2011 Consolidated statement of cash

More information

It s Time to Write Your Business Plan By Jim Mulligan

It s Time to Write Your Business Plan By Jim Mulligan It s Time to Write Your Business Plan By Jim Mulligan If you re looking to start a business, the thought of developing a business plan might seem daunting. Some even question the value of spending time

More information

A Simple Model. Introduction to Financial Statements

A Simple Model. Introduction to Financial Statements Introduction to Financial Statements NOTES TO ACCOMPANY VIDEOS These notes are intended to supplement the videos on ASimpleModel.com. They are not to be used as stand alone study aids, and are not written

More information

Introduction to Accounting

Introduction to Accounting Introduction to Accounting Text File Slide 1 Introduction to Accounting Welcome to SBA s online training course, Introduction to Accounting. This program is a product of the agency s Small Business Training

More information

Futures Price d,f $ 0.65 = (1.05) (1.04)

Futures Price d,f $ 0.65 = (1.05) (1.04) 24 e. Currency Futures In a currency futures contract, you enter into a contract to buy a foreign currency at a price fixed today. To see how spot and futures currency prices are related, note that holding

More information

CONSOLIDATED STATEMENT OF INCOME

CONSOLIDATED STATEMENT OF INCOME CONSOLIDATED STATEMENT OF INCOME 4 th quarter (a) 3 rd quarter 4 th quarter 2009 Sales 40,157 40,180 36,228 Excise taxes (4,397) (4,952) (4,933) Revenues from sales 35,760 35,228 31,295 Purchases, net

More information

A Simple Model. Cash Flow Statement

A Simple Model. Cash Flow Statement An introduction to the cash flow statement in the context of building a financial model. This series introduces the financial statements in the context of a financial model. Cash Flow Statement NOTES TO

More information

CASH FLOW STATEMENT & BALANCE SHEET GUIDE

CASH FLOW STATEMENT & BALANCE SHEET GUIDE CASH FLOW STATEMENT & BALANCE SHEET GUIDE The Agriculture Development Council requires the submission of a cash flow statement and balance sheet that provide annual financial projections for the business

More information

IPSAS 2 CASH FLOW STATEMENTS

IPSAS 2 CASH FLOW STATEMENTS IPSAS 2 CASH FLOW STATEMENTS Acknowledgment This International Public Sector Accounting Standard (IPSAS) is drawn primarily from International Accounting Standard (IAS) 7, Cash Flow Statements published

More information

STATEMENT OF CASH FLOWS AND WORKING CAPITAL ANALYSIS

STATEMENT OF CASH FLOWS AND WORKING CAPITAL ANALYSIS C H A P T E R 1 0 STATEMENT OF CASH FLOWS AND WORKING CAPITAL ANALYSIS I N T R O D U C T I O N Historically, profit-oriented businesses have used the accrual basis of accounting in which the income statement,

More information

Investment, Time, and Present Value

Investment, Time, and Present Value Investment, Time, and Present Value Contents: Introduction Future Value (FV) Present Value (PV) Net Present Value (NPV) Optional: The Capital Asset Pricing Model (CAPM) Introduction Decisions made by a

More information

CASH FLOW STATEMENT. MODULE - 6A Analysis of Financial Statements. Cash Flow Statement. Notes

CASH FLOW STATEMENT. MODULE - 6A Analysis of Financial Statements. Cash Flow Statement. Notes MODULE - 6A Cash Flow Statement 30 CASH FLOW STATEMENT In the previous lesson, you have learnt various types of analysis of financial statements and its tools such as comparative statements, common size

More information

CHAPTER 23. Statement of Cash Flows 1, 2, 7, 8, 12 3, 4, 5, 6, 16, 17, 19 9, 20 4, 5, 9, 10, 11 10, 13, 15, 16. 7. Worksheet adjustments.

CHAPTER 23. Statement of Cash Flows 1, 2, 7, 8, 12 3, 4, 5, 6, 16, 17, 19 9, 20 4, 5, 9, 10, 11 10, 13, 15, 16. 7. Worksheet adjustments. CHAPTER 23 Statement of Cash Flows ASSIGNMENT CLASSIFICATION TABLE (BY TOPIC) Topics Questions Brief Exercises Exercises Problems Concepts for Analysis 1. Format, objectives purpose, and source of statement.

More information

5 BUSINESS ACCOUNTING STANDARD CASH FLOW STATEMENT I. GENERAL PROVISIONS II. KEY DEFINITIONS

5 BUSINESS ACCOUNTING STANDARD CASH FLOW STATEMENT I. GENERAL PROVISIONS II. KEY DEFINITIONS APPROVED by Resolution No. 1 of 18 December 2003 of the Standards Board of the Public Establishment the Institute of Accounting of the Republic of Lithuania 5 BUSINESS ACCOUNTING STANDARD CASH FLOW STATEMENT

More information

Brief Report on Closing of Accounts (connection) for the Term Ended March 31, 2007

Brief Report on Closing of Accounts (connection) for the Term Ended March 31, 2007 MARUHAN Co., Ltd. Brief Report on Closing of (connection) for the Term Ended March 31, 2007 (Amounts less than 1 million yen omitted) 1.Business Results for the term ended on March, 2007 (From April 1,

More information

Accounting for Long-term Assets,

Accounting for Long-term Assets, 1 Accounting for Long-term Assets, Long-term Debt and Leases TABLE OF CONTENTS Introduction 2 Long-term Assets 2 Acquiring or creating 2 Tangible assets 2 Intangible assets 3 Depreciating, amortizing and

More information

HOME LOAN ADVICE CENTRE e-course (PART 1)

HOME LOAN ADVICE CENTRE e-course (PART 1) HOME LOAN ADVICE CENTRE e-course (PART 1) Welcome to the Home Loan Advice Centre e-course. The information contained within this e-course is Home Loan Advice Centre s compilation of information, tips,

More information

Slide 2. What is Investing?

Slide 2. What is Investing? Slide 1 Investments Investment choices can be overwhelming if you don t do your homework. There s the potential for significant gain, but also the potential for significant loss. In this module, you ll

More information

1 Money and income Currency currency notes (banknotes) coins cash bank deposits BrE: note or banknote; on paper AmE: bill

1 Money and income Currency currency notes (banknotes) coins cash bank deposits BrE: note or banknote; on paper AmE: bill 1 A B Money and income Currency The money used in a country euros, dollars, yen, etc. is its currency. Money in notes (banknotes) and coins is called cash. Most money, however, consists of bank deposits:

More information

Modeling Readiness Quiz

Modeling Readiness Quiz Modeling Readiness Quiz 1 Dear Students, Modeling Readiness Quiz Prepared by Prof. Dan Gode http://www.dangode.com Modeling is a useful course, but it also a rigorous and demanding elective. In the future,

More information

You have learnt about the financial statements

You have learnt about the financial statements Analysis of Financial Statements 4 You have learnt about the financial statements (Income Statement and Balance Sheet) of companies. Basically, these are summarised financial reports which provide the

More information