CASH FLOW STATEMENT

CASH FLOW STATEMENTIt reflects an enterprises major sources of cash receipts and cash payments. It reports the cash effects during a period of operation, its investing transactions and its financing transactions.

Cash includes cash equivalents as well such as short term , highly liquid investments usually with maturity period of less than three months T bills, certificates of deposit, commercial paper, and money market deposits.

Investors, analysts, creditors, managers, and others will find the information in the cash flow statement in assessing the following:

The organization`s ability to generate positive future net cash flowsThe organization`s ability to meet its obligations and ability to pay dividends and its needs for external financingThe difference between net profit and associated cash receipts and cash payments.The effects on the organizations financial position of both its cash and non- cash investing and financing transactions during the period.

Cash InflowsActivitiesCash OutflowsOperating ActivitiesPayments to Government for Taxes and DutiesPayments to Suppliers and Employees for Materials and ServicesReceipts from Customers from Sale of Goods and ServicesAdvances from CustomersCollections of DebtorStructure of Cash Flow

Investing Activities

Payment for Purchase of Investments and for giving LoansReceipts from Sale of Investments and Collection of LoansReceipts from Sale of Fixed AssetsReceipts from Interests and Dividends on Loans and InvestmentsPayment for Purchase of Fixed AssetsCash InflowsActivitiesCash Outflows

Financing Activities

Receipts from Issuance of SharesReceipts from Issuance of Debentures

Receipts from Other Borrowings

Payment for Buy-back of Share Capital and Redemption of Debentures and LoansPayment for Interest on Debentures and Other BorrowingsPayment for Dividends on Share CapitalCash InflowsActivitiesCash Outflows

I Cash Flow from Operating Activities

a) Cash Received from Customers +b) Cash Paid to Suppliers and Employees - c) Cash Generated from Operations (a-b) + / -d) Income Tax Paid -

Net Cash Flow from Operating Activities ***

1. Cash Received from Customers = Sales + Decrease in Gross Debtors Increase in Gross Debtors Bad Debts Written Off2. Cash Paid to Suppliers and Employees Cash paid for material, services (insurance, advertising etc) and employees. Adjusting Cost of Goods Sold and Expenses on Profit and Loss Account for changes in inventory , B/P , creditors , prepaid expenses , and for non- cash expenses. = COGS + Selling and Administrative Expenses Depreciation Expense Bad Debt Expense + Increase (-Decrease) in Inventories+ Increase (-Decrease) in Prepaid Expense + Decrease (-Increase) in Creditors+ Decrease (-Increase) in B/P3. Cash Generated from Operations = Cash Received from Customers - Cash Paid to Suppliers and Employees4. Income Tax Paid If the amount of income tax expense on P/L is more than the cash payment for tax, then there is an increase in the income tax payable during the current year. If income tax expense is less than cash payment for tax, then there is a decrease in the income tax payable. = Income Tax Expense + Decrease (-Increase) in Income Tax Payable

II Cash Flow from Investing Activities Purchase of Plant & Machinery - Proceeds from Sale of Plant & Machinery + Purchase of Investments - Proceeds from Sale of Investments + Interest Received +

Net Cash Used in Investing Activities ***

III Cash Flow from Financing Activities

Proceeds from Issuance of Share Capital +Repayment of Unsecured Loans - Redemption of Secured Loans -Dividend Paid -Interest Paid - Net Cash Provided by Financing Activities ***

I Cash Flow from Operating Activities

1. Cash Received from Customers = Sales + Decrease in Gross Debtors Increase in Gross Debtors Bad Debts Written Off = 9,25,000 [ (1,25,000+9,000)-(93,000+7,000)]-10,000 = 9,25,000 34,000 10,000 = 8,81,000

2. Cash Paid to Suppliers and Employees = COGS + Selling and Administrative Expenses Depreciation Expense Bad Debt Expense + Increase (-Decrease) in Inventories+ Increase (-Decrease) in Prepaid Expense + Decrease (-Increase) in Creditors+ Decrease (-Increase) in B/P = 6,69,000 + 70,000 12,000 + 58,000(debtor) -2,000(prepaid) + 22,000(Creditors) 8,000 (B/P)= 7,97,000 Note: Depreciation Expense written as a separate item thus no need to deduct here.

3. Cash Generated from Operations = Cash Received from Customers - Cash Paid to Suppliers and Employees = 8,81,000 - 7,97,000 = 84,0004. Income Tax Paid = Income Tax Expense + Decrease (-Increase) in Income Tax Payable = 27,000 15,000 = 12,000

Cash Flow StatementFor the year ended March 31,2005Cash Flow from Operating Activities :Cash Received from Customers 8,81,000Cash Paid to Suppliers and Employees (7,97,000)Cash Generated from Operations 84,000Income Tax Paid (12,000)Net Cash Provided by Operating Activities72,000

Cash Flow from Investing Activities :Purchase of Plant & Machinery (1,73,000)Proceeds from Sale of Plant & Machinery 22,000Purchase of Investments (26,000)Proceeds from Sale of Investments 42,000Interest Received 7,000Net Cash Used in Investing Activities (1,28,000)

Cash Flow from Financing Activities :Proceeds from Issuance of Share Capital 1,00,000Repayment of Unsecured Loans (1,000)Redemption of Secured Debenture (27,000)Dividend Paid (25,000)Interest Paid (22,000)Net Cash Provided by Financing Activities 25,000Net Decrease in Cash and Cash Equivalents(31,000)Cash and Cash Equivalents at the Beginning of the Period51,000Cash and Cash Equivalents at the End of the Period20,000

Indirect Method

Cash Flow from Operating Activities: Net Profit before Income Tax **** Depreciation + Bad Debts Expense + Gain on Sale of Plant & Machinery Loss on sale of Investments + Interest Expense + Interest Income Increase in Debtors (including bad debts written off) Increase in Inventories Decrease in Pre-paid Expenses + Increase in Bills Payable + Decrease in Creditors Income Tax Paid -

Net Cash Provided by Operating Activities ****

Cash Flow Statement - Indirect MethodFor the year ended March 31,2005Cash Flow from Operating Activities :Net Profit before Income Tax70,000Depreciation98,000Bad Debts Expense12,000Gain on Sale of Plant & Machinery(6,000)Loss on Sale of Investments9,000Interest Expense22,000Interest Income(7,000)Operating Profit before Working Capital Changes1,98,000Increase in Debtors (including bad debts written off)(44,000)Increase in Inventories(58,000)

Decrease in Pre-paid Expenses2,000Increase in Bills Payable8,000Decrease in Creditors(22,000)Cash Generated from Operations84,000Income Tax Paid(12,000)Net Cash Provided by Operating Activities72,000

Cash Flow from Investing Activities :Purchase of Plant & Machinery (1,73,000)Proceeds from Sale of Plant & Machinery 22,000Purchase of Investments (26,000)Proceeds from Sale of Investments 42,000Interest Received 7,000Net Cash Used in Investing Activities (1,28,000)

Cash Flow from Financing Activities :Proceeds from Issuance of Share Capital 1,00,000Repayment of Unsecured Loans (1,000)Redemption of Secured Loans (27,000)Dividend Paid (25,000) Interest Paid (22,000) Net Cash Provided by Financing Activities 25,000Net Decrease in Cash and Cash Equivalents(31,000)Cash and Cash Equivalents at the Beginning of the Period51,000Cash and Cash Equivalents at the End of the Period20,000

Cash Received from Customers = Sales (5,70,000) + Decrease in Gross Debtors (1,78,000 37,000) Bad Debts Written Off (14,000) = 6,97,000

Cash Paid to Suppliers and Employees = COGS (4,45,000)+ Selling Expense(46,000) - Bad Debt Expense (10,000) + Increase in Inventory (1,51,000 1,19,000) + Increase in Pre-paid Expense (6,000-2,000)+Decrease in Creditors (1,78,000 24,000) +Decrease in B/P (9,000 6,000) =4,45,000 +46,000 10,000 + 32,000 + 4,000 + 1,54,000 + 3,000 = (6,74,000)

Cash Flow Statement - Direct MethodFor the year ended Jan 31,2008Cash Flow from Operating Activities :Cash Received from Customers 6,97,000Cash Paid to Suppliers and Employees (6,74,000)Cash Generated from Operations 23,000Income Tax Paid (8,000)Net Cash Provided by Operating Activities15,000

Cash Flow from Investing Activities :Purchase of Plant & Machinery (1,50,000)Proceeds from Sale of Plant & Machinery 10,000Purchase of Investments (30,000)Proceeds from Sale of Investments 85,000Interest Received 2,000Net Cash Used in Investing Activities (83,000)

Cash Flow from Financing Activities :Proceeds from Issuance of Share Capital 50,000Repayment of Unsecured Loans (10,000)Redemption of Secured Loans (15,000)Interest Paid (14,000) Net Cash Provided by Financing Activities 11,000Net Decrease in Cash and Cash Equivalents(57,000)Cash and Cash Equivalents at the Beginning of the Period69,000Cash and Cash Equivalents at the End of the Period12,000