Presented by

Name: Bishal Sarkar

Adm. No. 16JE002426
Contents
Definition of Cash Flow Analysis.
Why Cash Flow Analysis.
Components.
Methods to calculate cash flow statements.
Discussion of the methods.
CASH FLOW - Definition
Cash flow analysis is the analysis of the money
coming into and going out of a business over a
period of time.
A cash inflow can be described as money flowing
into the company.
On the other hand, a cash outflow can be
described as money flowing out of the company.
Money comes in through sales, capital, finance
and money goes through purchases, wages and
overheads
A Cash Flow Statement is a financial statement used to
report a company’s source and use of cash.
IMPORTANCE OF CASH FLOW
Cash is NOT the same as profit.
Its an important analytical tool for creditors,
investors and other users of financial
statement data.
A business cannot survive without cash.
A business needs cash on a day to day basis.
A business is more likely to close if it has no
cash.
 Components of the cash flow statement

• Revenue-generating activities of the business

Operating entity
Activities

• Typically activities involving the acquisition and

Investing sale of fixed assets
Activities

• Activities which change the size and the

Financing composition of owners’ capital or changes in debt.
Activities
Calculation of Net Change in Cash

Net
cash flow cash flow cash flow change
from from from in cash
operations investing financing for the
period
 Formats of
Cash Flow
Statement

Direct Indirect
Method Method
 #1 Definition
Cash Flow Indirect Method
It uses net income as a base and adds non cash
expenses (e.g depreciation, amortisation of intangible
assets, preliminary expenses etc.)
Cash flow Direct Method
It uses only the cash transactions, i.e. cash spent and
cash received to produce the cash flow statement.
#3 Preparations
 #4 Accuracy and Time Taken

Not that much accurate because many More accurate as no adjustments

Adjustments need to be done. Needed.

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