UNIT 01

FINANCIAL STATEMENTS
LEARNING OBJECTIVES:

After studying this chapter one should be able to

• Interpret the information contained in

The Balance Sheet,

The Income Statement and

Statement of Cash Flows

• Understand the importance of this information in financial decision making

• Distinguish between market and book values

• Explain why income differs from cash flows.

Institute: Bahria University

Subject: Analysis of Financial Statements
Class: BBA
Instructor: Noman Shafi
Semester: Spring 2010

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The stakeholders of a company–the shareholders, lenders, directors, management and
employees-have a stake in the company’s success and all therefore need to monitor its
progress. For this reason the company prepares regular financial accounts and arranges
for an independent firm of auditors to certify that these accounts present a “true and fair
view.”
Major financial statements that a company is bound to prepare are:
• The Balance Sheet
• The Income Statement
• Statement of Cash Flows

THE BALANCE SHEET:

Balance sheet is the financial statement that shows the value of firm’s assets and
liabilities at a particular time. It represents a snapshot of firm’s assets and the source of
money to buy those assets. The assets are listed on the left side while the liabilities and
stockholders equity are listed on the right side of the balance sheet.
It's called a balance sheet because the two sides balance out. A company has to pay for all
the things it has (assets) by either borrowing money (liabilities) or getting it from
shareholders (shareholders' equity). The balance sheet is one of the most important pieces
of financial information issued by a company. It shows what a company owns and owes
at that point in time.
The basic balance sheet equation is

Assets = Liabilities + Shareholders’ Equity

MAIN BALANCE SHEET ITEMS

Current Assets: Current Liabilities:

Cash Accounts Payables
Marketable Securities Notes Payables
Accounts Receivables Accruals
Inventories
+
+ Long-term Liabilities
Fixed Assets:
Tangible Assets +
Intangible Assets Shareholders’ Equity
=
= Total Liabilities &
Total Assets Shareholders’ Equity

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Current Assets:
Current assets is the sum of cash, marketable securities, notes and accounts receivables
(minus reserves for bad debt), advances on inventories, inventories and any other item
that can be converted into cash in a short time usually less than a year.
Cash:
Cash includes money that firm has control of and access to. It is also referred to ‘bank’ in
accounting.
Marketable Securities:
These are very liquid securities that can be converted into cash quickly at a reasonable
price.
Accounts Receivable:
The money owned to the company (but not yet collected) for merchandise, products or
services sold or performed. Accounts receivable usually come in the form of operating
lines of credit and are usually due within a relatively short time period, ranging from a
few days or weeks to a year. These are also called trade debts.
Inventories:
For a manufacturing firm, it is the sum of finished merchandise on hand, raw material
and material in process. For retailers and wholesalers, it is the stock of goods on hand that
are for sale. These are also called stock in trade.

Fixed Assets:
A long-term tangible piece of property that a firm owns and uses in the production of its
income and is not expected to be consumed or converted into cash any sooner than at
least one year's time.
Tangible Assets:
Tangible asset is an asset that has a physical form such as machinery, buildings, land,
equipment, fixtures and furniture etc. salvage value and depreciation is subtracted from
these assets.
Intangible Assets:
An asset that is not physical in nature. Corporate intellectual property (items such as
patents, trademarks, copyrights, business methodologies), goodwill and brand recognition
are all common forms of intangible assets in today's marketplace. Intangible assets can
often be considered to have indefinite useful lives. The systematic write-off of the cost of
an intangible asset is called amortization.

Current Liabilities:
Current liabilities include the total of all money owed by the company that will fall due
within one year.
Accounts Payable:
Accounts payables are sometimes called trade payables. These are the total of all money
owed by the company to suppliers and vendors for raw material, product or merchandise.
Notes Payables:
It stands for the money borrowed by the company that is to be paid back within one year.
Accruals:
Accruals are the taxes or wages that are accumulated against current profits but not yet
due to be paid.

Long-term Liabilities:
Long-term liabilities are a company's liabilities for leases, bond repayments, mortgages
and other items due in more than one year.
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Shareholders’ Equity:
Shareholders’ Equity refers to what the owners have left with when all liabilities have
been met. It is represented on the balance sheet as the difference between the total assets
and the total liabilities. It is also called net worth or stockholders’ equity. It includes the
share capital and the retained earnings.

There are two patterns for presentation of a balance sheet. The American companies
prepare their balance sheets on the descending order of liquidity. Thus the current assets
occur first and fixed assets afterwards. Similarly on the right side, the current liabilities
are shown first and then the fixed liabilities and shareholders’ equity.
However, the British pattern of presentation is the opposite of the one below that is on an
ascending order of liquidity. The fixed assets are presented first and current assets follow
them. On the other side, the shareholders’ equity being the least liquid is presented first,
which is followed by the fixed, and then the current liabilities.

Following is the example of the first pattern.

Nike Incorporation
Balance Sheet
As on December 1992

1992 1991 1992 1991

$ $ $ $
Current Assets: Current Liabilities:

Cash & Debt due for repayment 109 301

Marketable Securities 260 120 Accounts Payable 135 166
Accounts Receivables 596 522
Inventories 471 587 Other Current Liabilities 176 148

Other Current Assets 60 52 Total Current Liabilities 421 615

Total Current Assets 1388 1280 Long-Term Debt 69 30

Fixed Assets: Other Long-Term Liabilities 51 31

Property, Plant & Shareholders’ Equity:

Equipment 498 398
Less Accumulated Common Stock and
Depreciation 152 105 Other Paid In Capital 97 88
Retained Earnings 1235 945
Net Fixed Assets 346 292
Total Shareholders’ Equity 1332 1032
Other Assets 139 136
Total Liabilities &
Total Assets $1873 $1708 Shareholders’ Equity $1873

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An example of the British presentation pattern is as follows:
Nishat Mills Limited
Balance sheet
As at September 30, 2001
2001 2000
Rs in Thousands Rs in Thousands
EQUITY AND LIABILITIES
SHARE CAPITAL AND RESERVES
Authorized share capital
150000000 ordinary shares of Rs10 each 1500000 1500000
Issued subscribed and paid up share capital 1113444 1113444
Capital Reserves 1027622 1027622
Revenue Reserves 2576448 2428503
4717514 4569569
Surplus on revaluation of operating assets 12118 12118
NON CURRENT LIABILITIES
Redeemable capital 2205907 919250
Long term loans 155639 228499
Liabilities against assets subject to finance
lease 235220 103834
Deferred liability for gratuity 843 1091
2597609 1252674
CURRENT LIABILITIES
Current portion of long-term liabilities 768264 642729
Short-term Finances 5001841 4397584
Creditors, Accrued and other liabilities 781352 533645
Workers’ Participation Fund 20959 41587
Provision for taxation 146087 164068
Proposed dividend 167017 283928
Unclaimed dividend 9683 6955
6895203 6070496
14222444 11904857
ASSETS
NON CURRENT ASSETS
Tangible Fixed assets
Operating Fixed Assets 6194523 3679482
Assets subject to finance lease 467330 243102
Capital work in progress 154009 1465706
6815862 5388290
Long-term Investments 1390552 1390552
Long-term loans, deposits, prepayments and
deferred cost 100136 76963
8306550 6855805
CURRENT ASSETS
Stores, spare parts and loose tools 541611 507128
Stock in trade 1966667 1410306
Short-term Investments 5938 5938
Trade debts 2027613 1409926
Advances, deposits and prepayments 377918 478999
Other receivables 630440 482438
Cash and bank balances 365707 754317
5915894 5049052
14222444 11904857
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Book Values and Market Values:
Book value

The value at which an asset is carried on a balance sheet is called book value. In other
words, the cost of an asset minus accumulated depreciation.
Items in the balance sheet are valued according to GAAP (Generally Accepted
Accounting Principles-procedures for preparing financial statements) and IAS
(International Accounting Standards). These state that assets must be shown on the
balance sheet at their historical cost adjusted for depreciation. These book values are
therefore ‘backward looking’ measures of value. These are based on the past cost of an
asset not the current market price or value of the firm.

Market Value

The current worth or value of an asset, at which it can be sold or purchased, is called its
market value. For example a manufacturing plant was purchased at Rs100,000 five years
ago. Today its market value is Rs120,000.
Market values and book values for an asset may not be the same. For some assets, book
values are greater than market values, while for others the reverse is true.
For example suppose that an automobile manufacturing plant cost Rs1 million 2 years
ago, but in today’s market the demand for automobile has increased and that plant sells
for Rs1.3 million. The book value of the plant would be less than its market value and the
balance sheet would undervalue the company’s assets.
Or consider that the automobile demand has decreased and the same plant sells in the
market for Rs0.9 million, then the market value would be less than the book value.
The difference between book value and market value is greater for some assets than for
others.

Assets:

For cash it is zero. For marketable securities and other current assets, it is either zero or
very minor. But is potentially very large for fixed assets where the accountant starts with
the initial cost of fixed asset and then depreciates that figure according to a pre specified
schedule. The purpose of depreciation is to allocate the original cost of the asset over its
life, and the rules governing depreciation of asset values do not reflect the actual loss of
market value. As a result the book value of fixed asset often is much higher than the
market value, but often it is less.

Liabilities:

The same goes for right hand side of the balance sheet. In the case of liabilities, the
accountant simply records the amount of money that you have promised to pay. For
short-term liabilities, this value is generally close to the market value of that promise. For
example, if you owe the bank Rs1 million tomorrow, the accounts show a book liability
of Rs1 million. As long as you are not bankrupt, this book value is also roughly the value
to the bank of your promise.
But if this amount is not due to be repaid for several years, the accounts still show a
liability of Rs1 million, but how much your debt is worth depends on what happens to the
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interest rates. If the interest rates rise after you have issued the debt, lenders may not be
prepared to pay as much as Rs1 million for your debt; if interest rates fall, they may be
prepared to pay more than Rs1 million. Thus market value of a long-term liability may be
higher or lower than the book value.

Shareholders’ Equity:

The differences between book value and market value are likely to be the greatest for
shareholders’ equity. The book value of the equity measures the cash that shareholders
have contributed in the past plus the cash that company has retained and reinvested in the
business on their behalf.
This value often bears little resemblance to the total market value that the investors place
on the shares. Shareholders are concerned with the market value of their shares; market
value, not book value is the price at which they can sell their shares. Managers who wish
to keep the shareholders happy will focus on the market values.

Market Value and Book value Balance Sheets:

Assets and liabilities are presented on balance sheets according to their book values.
However, the market value balance sheet records each asset at its current market value
rather than historical cost less depreciation. Similarly each liability is shown at the market
value. Therefore the difference between market values of assets and liabilities is the
market value of the shareholders’ equity claim. The stock price is simply the market
values of shareholders’ equity divided by the number of outstanding shares.

EXAMPLE:

Book Value Balance Sheet For XYZ Motors

(Figures in billions of rupees)
Assets Liabilities and Shareholders’
Equity
Auto plant Rs10 Debt Rs4
Shareholders’ Equity 6

Suppose currently 100 million shares are outstanding and the investors are placing a
market value of Rs7.5 billion (Rs75 per share times 100 million shares) on XYZ’s equity.
We assume that debt outstanding is worth Rs4 billion. Therefore if an investor owed all
XYZ’s shares and all its debt, the value of his investment would be 7.5+4=Rs11.5 billion.
Because one can buy the entire company for Rs11.5 billion, the total value of XYZ’s
assets must also be Rs11.5 billion. In other words, market value of assets must be equal
to market value of liabilities plus the market value of shareholders’ equity.

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 Market Value Balance Sheet For XYZ Motors
(Figures in billions of rupees)
Assets Liabilities and Shareholders’
Equity
Auto plant Rs11.5 Debt Rs4
Shareholders’ Equity Rs7.5

Here the market value of XYZ plant is Rs1.5 billion more than the cost of plant to
produce. The difference is due to superior profits that investors expect the plant to earn.
Thus in contrast to balance sheet shown in the company books, the market value balance
sheet is ‘forward looking’. It depends on the benefits that investor expect the assets to
produce.
We often find shares of stock sell for more than the value shown in company books that
is their market value is greater than the book value. This is because firms find it attractive
to raise money to invest in various projects because they believe the projects will be
worth more than they cost.

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INCOME STATEMENT:

Income statement is a financial statement that shows the revenues, expenses and net
income of a firm over a period of time.
It is a financial report that - by summarizing revenues and expenses, and showing the net
profit or loss in a specified accounting period - depicts a business entity’s financial
performance due to operations as well as other activities rendering gains or losses. It is
also known as “Profit and Loss Account” or "statement of revenue and expense".
The income statement is the most analyzed portion of the financial statements. It displays
how well the company can assure success for both itself and its shareholders through the
earnings from operations.
The general format of an income statement is as follows:

ABC Corporation
Income Statement
For the year/period ended…

Net Sales
Cost of Goods Sold
Gross Profit
Operating Expenses (Selling and Administrative Expenses)
Operating Income or Earnings Before Interest and Taxes (EBIT)
Interest Expense or Financial Cost
Earning Before Taxes (EBT)
Income Tax
Earning After Tax (EAT) or Net Income

Net Sales:
Net sales represent the revenues collected by the sales during the period. This is
sometimes written as ‘Revenues’ in the income statement. It is the total Rupees value of
all sales minus returns, allowances, discounts and rebates.
Cost of Goods Sold:
It is a figure or an amount reflecting the cost of the product or good that a company sells
to generate revenue, appearing on the income statement as an expense. It is also referred
to as "cost of sales." It is essentially a cost of doing business, such as the amount paid to
purchase raw materials in order to manufacture them into finished goods. For example, if
a Rs10 screw costs Rs6 to make, then your COGS is Rs6 per screw.
Usually a separate statement accompanies the income statement for cost of goods alone.
Gross Profit:
Gross profit is the company's revenue minus cost of goods sold. Also called ‘gross
margin’ and ‘gross income’.
This is an important number when analyzing a company; it indicates how efficiently
management uses labor and supplies in the production process. Gross income varies
significantly from industry to industry.
Operating Expenses:
Operating expenses include expenses of like selling expenses, marketing expenses,
depreciation, and administrative and other general expenses.

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Operating Income or Earnings Before Interest and Taxes (EBIT):
It is an indicator of a company's profitability, calculated as revenue minus expenses,
excluding tax and interest. EBIT is also referred to as "operating earnings" and "operating
profit". The formula to calculate it is as follows:
EBIT = Revenue - Operating Expenses
Interest Expense:
It is the expense for borrowed money. It is sometimes written as financial cost.
Earning Before Taxes (EBT):
It is an indicator of a company's financial performance and is calculated as:
EBT = Revenue - Expenses (excluding tax)
EBT provides a level measure to compare companies in different tax jurisdictions.
Income Tax:
An income tax is a tax on any money earned during a fiscal year, usually filed on a yearly
basis. It is essentially a direct tax on any income; this includes capital gains, wages, etc.
Net Income:
The amount left over after deducting all due bills for the accounting period and paying
off all due interest and federal taxes is called net income or net profit.
It is an important measure of how profitable the company is over a period of time. The
measure is also used to calculate earnings per share. It is often referred to as "the bottom
line" since net income is listed at the bottom of the income statement. In the U.K., net
income is known as "profit attributable to shareholders".

A summary income statement of Nike Incorporation is as follows:

Nike Incorporation
Income Statement
For the year ended December 1992
(Figures in millions of dollars)
$
Revenues 3405
Cost of Goods Sold 2041
Gross Profit 1364
Administrative expenses 761
Depreciation 48
Other Expenses 2
Earnings Before Interest and Taxes 553
Interest Expense: 31
Income Tax: 193
Net Income 329

Allocation of net income

Additions to retained earning 285
Dividends 44

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The annual report of Nishat Mills Limited of Pakistan shows the following income
statement
Nishat Mills Limited
Profit and Loss Account
For the year ended 30 September, 2001

2001 2000

Sales 11662457 10134014

Cost of sales (9605013) (7991952)
Gross profit/(loss) 2057444 2142062

Administrative, Selling and

General expenses 710360 545717
Operating Profit 1347084 1596345
Other Income 116363 102431
Financial and Other charges 1049756 869014
Workers’ Participation
Fund 20960 41587
Profit before Taxation 392731 788175
Provision for taxation 77769 87788
Profit after taxation 314962 700387
Unappropriated Profit
brought forward 985 526
Profit available for
appropriation 315947 700913
Appropriations
Proposed dividend Rs1.50
(2000:Rs2.55) per share 167017 283928
Transferred to general
reserve 148000 416000
Unappropriated Profit 930 985

Earning Per Share (Rs) 2.83 6.29

Source: Annual Report 2001, Nishat Mills Limited

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PROFIT VERSUS CASH FLOWS:

It is important to differentiate between the profits and the cash that a company generates.
There are three reasons why profits and cash are not the same.

1. Depreciation:

When accountants prepare income statement, they do not simply count the cash
coming in and going out. Instead the accountant starts with the cash payments but
then divides these payments into two groups;
• Current expenditures such as wages that are deducted from current profits.
• Capital expenditures such as purchase of new machinery. Rather than
deducting the cost of machinery in the year it is purchased, the accountant
makes an annual charge for depreciation. Thus the cost of machine is
spread over its forecasted life.
When calculating profits, the accountant does not deduct the expenditure on new
equipment that year, even though cash is paid out. Therefore, to calculate the cash
produced by the company, it is necessary to

Add back the depreciation charge (which is not a cash payment)
and

To subtract the expenditure on new capital equipment (which is a
cash expense).

2. Consider the following stages in a manufacturing business.

Period 1: the firm produces the goods.
Period 2: the firm sells the goods for Rs1000.
Period 3: the firm gets paid for the goods.

Although the cash does not arrive until period 3, the sale shows up in period 2 in
the income statement. The figure for accounts receivable in the balance sheet for
period 2 shows that the company’s customers owe an extra Rs1000 in unpaid
bills. Next period, after the customers have paid the bills, the receivables decline
by Rs1000. Therefore, the cash that the company receives is equal to the sales
shown in income statement less the increase in unpaid bills.

Period 2 3

Sales 1000 0
- Change in receivables 1000 (1000)
=
Cash received 0 1000

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3. Accrual Accounting:

It is an accounting method that measures the performance and position of a

company by recognizing economic events regardless of when cash transactions
occur. The general idea is that economic events are recognized by matching
revenues to expenses (the matching principal) at the time in which the
transaction occurs rather than when payment is made (or received). This
method allows the current cash inflows/outflows to be combined with future
expected cash inflows/outflows to give a more accurate picture of a company's
current financial condition.

The accountant tries to match the costs of producing the goods with the revenues
from the sales. For example, suppose that it costs Rs600 in period 1 to produce
the goods that are then sold in period 2 for Rs1000. it would be misleading to say
that business made a loss in period 1 (when it produced the goods) and was very
profitable in period 2 (when it sold them). Therefore, to provide a fair measure of
firm’s profitability, the income statement will not show the Rs600 as an expense
of producing the goods until they are sold in period 2 through the use of accrual
accounting. The accountant gathers together all expenses that are associated with
a sale and deducts them from revenues to calculate profit, even though the
expenses may have occurred in an earlier period.

The accountant cannot ignore the fact that the firm spent money on producing the
goods in period 1. So the expenditure will be shown in period 1 as an investment
in inventories. Subsequently in period 2 when the goods are sold, the inventories
would decline again.

In the above example, the cash is paid out when the goods are manufactured in
period 1 but this expense is not recognized until period 2 when goods are sold.
Therefore the cash outflow is equal to the cost of goods sold, which is shown in
income statement, plus the change in inventories.

Period 1 2

Cost of Goods Sold 0 600

+ Change in inventories 600 (600)
=
Cash paid out 600 0

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THE CASH FLOW STATEMENT:

Cash Flow Statement is one of the quarterly financial reports any publicly traded
company is required to disclose to the SEC (Securities and Exchange Commission) and
the public. This document provides aggregate data regarding all cash inflows a company
receives from its ongoing operations, financing and external investment sources, as well
as all cash outflows that pay for business activities, financing and investments during
a given quarter.

Thus a statement of cash flow summarizes the effects on cash of the operating, investing
and financing activities of a company during an accounting period.1

Purposes of the Statement of Cash Flows:

As described earlier, cash flows are different from the net income or profit a company
generates. These differences can arise for at least two reasons:

The income statement does not recognize capital expenditure as expenses in the
year that the capital goods are paid for. Instead it spreads those expenses over
time in the form of an annual deduction for depreciation.

The income statement uses the accrual method of accounting, which means that
revenues and expenses are recognized as they are incurred rather than when cash
is received or paid out.

Further more, the income statement and the balance sheet do not answer all the questions
raised by the users of the financial statements. Such questions include

• How much cash was generated from company’s operations?

• How can the cash account be overdrawn when the accountant said the business
was profitable?
• Why is such a profitable company able to pay only small dividends?
• How much was spent for the new plant and equipment and where did the
company get cash for the expenditures?
• How was the company able to pay a dividend when it incurred a net loss for the
year?

The statement of cash flows provides important information not shown directly in other
financial statements, and answers these questions. Even profitable companies can fail to
adequately manage their cash flow, which is why the cash flow statement is important: it
helps investors see if a company is having trouble with cash.

1
Roger H. Hermanson, James Don Edwards, “Financial Accounting: A Business
Perspective”

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Basic contents of Statement of Cash Flows:

The statement of cash flows classifies cash receipts and disbursements as operating,
investing and financing cash flows. Both inflows and outflows are included within each
category.

Cash flows from operating

activities

Statement of Cash Flows Cash flows from investing

shows activities

Cash flows from financing

activities

Investing and financing activities that do not affect cash are not shown in statement of
cash flows, rather they are shown in a separate schedule.

1. Operating Activities:

Operating activities generally include the cash effects (inflows and outflows) of
transactions and other events that enter into the determination of net income.

Cash inflows from operating activities effect items that appear on the income
statement and include:

Cash receipts from sale of goods or services

Interest received from making loans

Dividends received form investments in equity securities

Cash received from sale of trading securities

Other cash receipts that do not arise from transactions defined as investing or
financing activities, such as amount received to settle lawsuits, proceeds of
certain insurance settlements, and refunds from suppliers.

Cash outflows for operating activities affect items that appear on the income
statement and include payments:

To acquire inventory

To other suppliers and employees for other goods or services

To lenders and other creditors for interest

For purchases of trading securities

All other cash payments that do not arise from transactions defined as
investing or financing activities; such as taxes and payments to settle lawsuits,
cash contributions to charities and cash refunds to customers.

Cash payments to settle accounts/notes payable, wages payable, and income
tax payable.
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 2. Investing Activities:

Investing activities generally include transactions involving the acquisition or

disposal of non-current assets.

Cash Inflows from investing activities include cash received from:

Sale of property, plant and equipment

Sale of available-for-sale and held-to-maturity securities

Collection of long-term loans made to others.

Cash Outflows for investing activities include cash paid:

To purchase property, plant and equipment

To purchase available-for-sale and held-to-maturity securities

To make long-term loans to others

3. Financing Activities:

Financing activities generally include the cash effects (cash inflows and outflows) of
transactions and other events involving creditors and owners.

Cash inflows from financing activities include cash received from

Issuing stocks and

Issuing debt (bonds, mortgages and notes, and from other short-term and long-
term borrowing of cash).

Cash Outflows for financing activities include

Payment of cash dividends or distribution to owners (including cash paid to
purchase treasury stock) and

Payment of debt (principal amount only). Payment of interest is not included
because interest expense appears on the income statement and is, therefore,
included in operating activities.

Preparation of Statement of Cash Flows:

There are two ways to prepare the statement of cash flows;

Direct Method

Indirect Method
In both the methods, cash flows from investing and financing activities remain the same.
However the operating cash flows differ. In the direct method, reporting starts from the
sales and ends at the operating cash flow for the period. While in indirect method,
reporting starts from the net income and ends at the operating cash flow.

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Statement of Cash Flows-XYZ Company
A) Direct Method:

XYZ Company
Statement of Cash Flows
For the year ended December 31, 2005

Cash Flows form Operating Activities

Cash received from customers Rs130,000
Cash paid for merchandise (102,000)
Cash paid for operating expenses (23,000)
Net cash from operating activities Rs5000

Cash Flows from Investing Activities

Purchase of equipment (20,000)

Cash Flows from Financing Activities

Proceeds from issuing common stock Rs30,000
Paid cash dividends (4000)
Net cash from financing activities 26,000

Net increase/decrease in cash Rs11,000

B) Indirect Method:
XYZ Company
Statement of Cash Flows
For the year ended December 31, 2005

Cash Flows form Operating Activities

Net Income Rs10,000
Depreciation expense and other non
Cash expenses 5000
Adjustments to reconcile net income to This
Cash from operating activities: portion
Increase in accounts receivables (10,000) is same
Decrease in merchandise inventory 4000 in both
Decrease in accounts payable (6000) methods
Increase in accrued payables 2000
Net cash from operating activities Rs5000

Cash Flows from Investing Activities

Purchase of equipment (20,000)

Cash Flows from Financing Activities

Proceeds from issuing common stock Rs30,000
Paid cash dividends (4000)
Net cash from financing activities 26,000

Net increase/decrease in cash Rs11,000

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BIBLIOGRAPHY:

• Fundamentals of Corporate Finance

Richard A Brealy, Stewart C. Myers, and Allan J.Marcus

• Financial Accounting: A Business Perspective

Roger H. Hermanson, James Don Edwards

• Financial Analysis
James O. Gill

Compiled by: Qindeel Zafar, Teaching and Research Associate

Supervised by: Noman Shafi, Assistant Professor, DAS, Quaid-I-Azam
University,ISB
Date: Jan 2006

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