Cash flow statement

Definition cash and cash equivalents

1. Short-term investment

2. Readily convertible to cash

3. Insignificant risk or changes in value

Financing activities

Involving lenders
Borrowing - positive
Repayment - negative

Involving shareholders
Raising new equity capital - positive
Dividends - negative

Investing activities

Involving non-current assets
Purchase of non-current asset - negative
Sale of non-current asset - positive

Operating activities

Operating profit
Financial items received/paid
Taxes paid

Adjustment 1: For non cash flow related items
+ Depreciation/amortisation/impairment
± Realised gain/loss
± Other

Adjustment 2: For changes in working capital
± Current operating assets (ex. inventory, accounts receivable)
± Current operating liabilities (ex. accounts payable)

= Cash flow from operating activities

Cash flow basic structure

Operating activities

Investing activities

Financing activities

= Net cash flow for period

Direct and indirect method

Only for operating activities

Direct: Uses real-time figures, shows inflows and outflows directly

Indirect: Adjust net-income with changes from non-cash transactions