What is a cashflow statement?

A cash flow statement is a financial statement that shows the amount of cash and cash equivalents flowing to and out of a company, therefore the cash flow statement measures how well a company manages its cash, meaning how well the company generates cash to pay its obligations and provides funds for its operating expenses.

There are four parts to the Statement of Cash Flows (or Cash Flow Statement):
     1. Operating Activities
     2. Investing Activities
     3. Financing Activities
     4. Supplemental Disclosures

TYPES OF CASH INFLOWS AND OUTFLOWS

Operating activities—Income statement items

Cash inflows:

From sale of goods or services.

From interest received and dividends received.

Cash outflows:

To suppliers for inventory.

To employees for wages.

To government for taxes.

To lenders for interest.

To others for expenses.

Investing activities—Changes in investments and long-term assets

Cash inflows:

From sale of property, plant, and equipment.

From sale of investments in debt or equity securities of other entities.

From collection of principal on loans to other entities.

Cash outflows:

To purchase property, plant, and equipment.

To purchase investments in debt or equity securities of other entities.

To make loans to other entities.

Financing activities—Changes in long-term liabilities and stockholders’ equity

Cash inflows:

From sale of common stock.

From issuance of debt (bonds and notes).

Cash outflows:

To stockholders as dividends.

To redeem long-term debt or reacquire capital stock (treasury stock).

More information on Cash Flow.

Which of the parts will be affected by the following? Check with the key below.

1. Depreciation Expense – operating activities
2. Proceeds from the sale of equipment used in the business.
3. Declaration and payment of dividends on company’s stock.
4. Gain on the Sale of Automobile formerly used in the business.
5. An increase in the balance in a retailer’s Merchandise Inventory.
6. An increase in the balance in Accounts Payable.
7. The purchase of a new delivery truck to be used in the business.
8. A decrease in the balance of Accounts Receivable.
9. A decrease in the current asset account Prepaid Insurance.
10. The amortization of the cost of an intangible asset.

Key:

1. Operating 2.  Investing 3. Financing 4. Operating 5. Operating 6. Operating 7.  Investing 8. Operating 9.  Operating 10. Operating

Glossary:

Depreciation – amortyzacja środków trwałych rzeczowych

Proceeds – wpływy

Dividend – dywidenda

Gain – zysk

Inventory – zapasy

Accounts payable – zobowiązania

Purchase – zakup

Accounts receivable – należności

Current assets – aktywa obrotowe

Amortization – amortyzacja wartości niematerialnych i prawnych

Intangible assets – wartości niematerialne I prawne

Would you like to learn more about Cash Flow Statement in English? Contact me.