Cash flow statement

From Academic Kids

A cash flow statement is a financial report that shows incoming and outgoing money during a particular period (often monthly or quarterly). It does not include non-cash items such as depreciation. This makes it useful for determining the short-term viability of a company, particularly its ability to pay bills.

People and groups interested in cash flow statements include:

  • Accounting personnel, who need to know whether the organization will be able to cover payroll and other immediate expenses
  • Potential lenders/creditors, who want a clear picture of a company's ability to repay
  • Potential investors who need to judge whether the company is financially sound
  • Potential employees or contractors who need to know whether the company will be able to afford compensation

Cash flow statements are particularly important for start-up companies with limited liquid assets. These companies are vulnerable to devastating cash shortages, even when Accounts Receivable balances point to long-term financial health.

Contents

Statement of Cash Flows

 Statement of Cash Flow for the period 1/1/xx to 1/1/xx+1
 Cash flow from operations (CFO)      +/-  x x
 Cash flow from investing (CFI)       +/-  y y
 Cash flow from financing (CFF)       +/-  z z
 Equals change in cash account      = change of cash balance
 + Beginning of period cash         + Beginning cash
 = Ending cash balance              = Ending cash

Operating activities

Investing activities

Financing activities

Preparation methods

Direct Method

Shows the major classes of gross cash receipts and payments.

Indirect Method

Shows the net profit or loss as a starting point and makes adjustments for all transactions of a non-cash nature, deferrals or accruals of operating cash receipts or payments, and items of income or expense associated with investing or financing activities.

Example

Citigroup Incorporated cash flow: ([1] (http://finance.yahoo.com/q/cf?s=C&annual)) ([2] (http://www.citigroup.com/citigroup/fin/ar.htm))

Cash Flow (In millions of dollars)
Period Ending 31-Dec-03
Operating Activities, Cash Flows Provided By or Used In
Net Income 17,853
Adjustments To Net Income 13,260
Depreciation 2,121
Changes In Liabilities 31,571
Changes In Inventories -
Changes In Other Operating Activities (93,847)
Total Cash Flow From Operating Activities (14,854)
Investing Activities, Cash Flows Provided By or Used In
Capital Expenditures (2,354)
Investments (23,757)
Other Cashflows from Investing Activities (20,196)
Total Cash Flows From Investing Activities (46,307)
Financing Activities, Cash Flows Provided By or Used In
Dividends Paid 5,773
Treasury stock acquired Paid (2,416)
Issuance of long-term debt 67,054
Payments and redemptions of long-term debt (45,800)
Change in deposits 42,136
Contractholder fund deposits 8,346
Contractholder fund withdrawals (5,976)
Cash flows from financing activities of continuing operations 64,405
Effect of exchange rate changes on cash and cash equivalents 579
Change in cash and due from banks $3,823

See also

nl:Kasstroomoverzicht

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