During your studies or career, you may be asked to prepare a statement of cash flows and then comment on the statement and the entity’s cash position.
In this article we take a look at the benefits and limitations of Cash Flow Statements.
Cash flow statements – benefits
Cash flow information provided in the statement of cash flows can be beneficial, for example:
The third section of a statement of cash flows is for financing activities.
In this article, we’re looking at the second section of a statement of cash flows which is for investing activities.
Operating activities are those activities linked to provision of goods or services by the entity, so the normal trading activities of the entity.
In this article, we look at the Indirect Method of preparing a statement of cash flows.
When the indirect method of presenting the statement of cash flows is used, the net profit or loss for the period is adjusted for the following items:
Operating Activities – Direct method
When the direct method of presenting the statement of cash flows is used, the major classes or receipts and payments are listed out, and the final balance of these gives us the net cash flows from operating activities.
Outsourcing refers to a situation where an entity contracts an outside organisation to perform part of a manufacturing process or another function normally undertaken within the entity. Outsourcing may refer to an entity’s decision to make a particular component in house or to buy that component externally. Typically, however, outsourcing refers to longer term arrangements. …
Not all business combinations take place in one go. Sometimes a parent can acquire an entity in stages, which we call a step acquisition. This takes place when an acquirer holds an existing equity interest in the acquiree before the date of control. Say, for example, a company may hold 25% of a company, and then buy out another shareholder taking their share to 55% of the acquiree.
Statement of Financial Position At the end of the financial year, the SOFP of the overseas subsidiary will be translated using the closing rate (i.e. the exchange rate at the date of the balance sheet) For opening net assets, these were translated in last year’s financial statements at last year’s closing rate and must be retranslated for …