STATEMENT OF CASH FLOW

Revenue or expense  that changes a cash account over a  period of time. Cash inflows usually generated from one of three activities -first  financing, second operations or last investing activities. although this is also occurs as a result of  gifts or donetion in the case of personal finance. Cash outflows result from expenses or investments from organisation.

It is also called the "statement of cash flows", that shows the amount of cash generated and used by a organistion's in a given period of time. It is calculated by adding non cash charges to net income after  the taxes from organisation. Cash flow can be indicated to a specific project, or to a business as a whole.And cash flow analysis statements are generally three parts:

    1.Operating activities: This section is evaluates net income and loses of a business. By assessing sales and business expenditures, all income from non-cash items is adjusted to incorporate inflows and outflows of cash transactions to determine a net figure.

    2.Investment activities: This section reports that inflows and outflows from purchases and sales of long term period business investments such as property, assets, equipment, and securities. For example - if your bakery business purchases an additional piece of kitchen equipment, this would be considered an investment and accounted for as an outflow of cash. If your business then sold equipment that was no longer needed, this would be considered an inflow of cash.

    3.Financing activities: This section accounts for the cash flow trends of all money that is related to financing  business. For example: if you received a loan for  small business, the loan itself would be considered an inflow of cash. Loan payments would be considered an outflow of cash, and both would be recorded in this part of the cash flow analysis statement.

Direct method:It shows each major class of gross cash receipts and gross cash payments. The operating cash flows section of the statement of cash flows under the direct method would appear something like it:


Indirect method: It adjusts accrual basis net profit or loss for the effects of non-cash transactions. The operating cash flows section of the statement of cash flows under the indirect method would appear something like it:



Financial analysts normally consider cash flow to be the best measure of a company's financial statement. Increased cash flow means that more funds are available in the business. On the other hand, reported net income is strongly influenced by a firm's accounting. Reduced income narmally means lower taxes and more cash, thus the same accounting practices that reduce net income can actually increase cash flow of business.

 A firm with large amounts of new investments and corresponding high depreciation charges might  be reported low or negative earnings at the same time in business. It has large cash flows to service debt and to acquire additional asset. Cable companies has huge investment requirements and are typical of firms that may be quite healthy in spite of reporting net losses.