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ANALYSIS OF CASH FLOW STATEMENT
ANALYSIS OF CASH FLOW STATEMENT        12
    
FROM: KHUSHBOO MURARKA
        DATE: 19/05/2019
        SUBJECT: ANALYSIS OF CASH FLOW STATEMENT
                    
Table of content
    Sr. No.
    Particulars
    Page
    1.
    Abstract
    3
    2.
    Introduction
    3
    3.
    Part A
    3
    a.
    Content : income statement and statement of cash flows
    3
    b.
    Income statement and statement of cash flows: Uses
    5
    4.
    Part B
    5
    I.
    Statement of cash flow analysis
    5
    a.
    Important sources and uses of cash for the companies
    5
    b.
    Cash flows from operations: A trend analysis
    6
    c.
    Analysis of the variation in the cash flows from operations and net income
    6
    d.
    Generation of cash from operations to settle capex expenditures
    6
    e.
    Generation of cash from operations to meet capex expenditures and dividends
    7
    f.
    Excess cash from operations: An Analysis
    7
    g.
    Utilization: working capital
    7
    h.
    Impact of other main items on the cash flows
    8
    i.
    Capital expenditures: movement analysis
    8
    j.
    Dividend payment: movement analysis
    8
    k.
    j. Borrowings: movement analysis
    8
    l.
    k. Working capital movement: trend analysis
    9
    II.
    Financial Strength analysis
    9
    III.
    Selection of the company for lending
    10
    5.
    Summary/ Conclusion
    11
    6.
    References
    12
1. Abstract:
The aim behind this report is to provide an understanding about the income statement and cash flow statement to the users of financial statements. The cash flow is among the major parts of financial statements and shows the cash movements of an entity during a particular period. The cash flow statements analyze and represent the cash flows movement into three categories: Cash flow from operating activities, financing activities and investing activities. We have conducted detailed research about cash flows movements of three companies in detail and have analyzed the cash flow movements under all three categories.
2. Introduction:
“Cash flow statement is the information about the cash flows of an entity, is valuable in providing with a basis to evaluate the capacity of the entity to generate cash and cash equivalents and the necessities of the entity to utilize those cash flows” (AASB, 2017). This cash flow report of an entity is very important for users to make many economic decisions. A statement of cash flows, when utilized in association with remainder of the financial statements, gives information that helps the clients to assess the adjustments in net asset of an entity, its financial structure and the capacity of the entity to influence the amount and timing of cash streams all together to adjust to changing conditions and opportunities (AASB, 2017). Cash flow statement is internal part of financial statements which shows the cash movement of an entity as at the end of accounting period and these cash movements are analyzed into three types:
1. Operating activities,
2. Investing activities and
3. Financing activities.

The net increase or decrease in the cash for a period from the above mentioned three activities are derived and then opening balance of cash and cash equivalents are added to it to arrive at the closing balance of cash and cash equivalents.
3. Part A:
a. Content : income statement and statement of cash flows:
 Income statement is one of the important financial statements which is used for measuring the profitability of the entity through a particular accounting period. Income statement is a calculation which shows the profit or loss of an entity amid a specified period of time, giving a summary of how the profit and loss is determined from gross revenue and expenses. The income statement consists the four key elements which are revenue/receipt, expense, profit and losses. The income statement of the entity reports the management and investors whether the company has made profit during the accounting period reported. (Chen, 2019)
Income statement of the company is sub divided into two section, operating and non-operating section.
The operating section of an income statement incorporates income (revenues) and expenses. Revenue comprises of cash generation or other benefits of resources of an entity, and expenses comprise of cash outflows or other spending of assets or earning of liabilities whereas expenses related to the operations are cost of goods sold which is the price of the inventory produced and being sold by the company. It also includes other cost such as selling cost, administration cost and other related costs.
The non-operating section incorporates revenues and gains from non-essential business activities, items that are either uncommon or infrequent, such as business costs like income tax expense and interest expense. Revenues expenses and gains and losses are components of income statement helpful not to characterize comprehensive income but rather to indicate how it is acquired. Thus by correlating, all these components of income fulfill the objectives that it provide details of profitability and business activity of the company to the users and it also provides the details about the profitability of the company which will be used for comparison with the other businesses in the same sector. Therefore, it provides valuable information of the business which includes operations of the company and the performance of the management (Chen, 2019).
The cash flow statement reports the flow of cash throughout the particular accounting period and it reports the actual cash inflows and outflows usually connected with the ongoing primary operations and investment related activities and financing activities of an entity (AASB, 2017).Hence it is clear that cash flow statement consists of three sections which includes operating section, investing section and financing section (Murphy, 2019)
Cash flows from operating activities are principally acquired from the principal revenue-producing activities of the entity, which include cash receipts from customers from rendering service and sale of goods, fees and commissions in various ongoing business activities, cash payments to suppliers for delivery and production and goods and services, payments to the employees, as well as other numerous of receipts and payments of cash in the form of insurance premium and claims and annuities and benefits all comes under operating activities (AASB, 2017).
Cash movement from investing activities are the cash flows which states that the expenditures have been made for assets expected to create or leads to future income and cash flows. This comprises of various example as cash payments to purchase various assets like property, plant and equipment etc., cash received from sale of those assets, Cash outflows to purchase of equity and debt instruments and inflows from selling of those equity, all comes under the investing activities (AASB, 2017).
Cash flows from financing activities are the cash flows which represent the transaction related to borrowing, issue of shares, buy back of shares, payment of dividend and transaction related from debt instruments and borrowing of cash and repayments on borrowings (AASB, 2017). Hence it represents the transaction of non-current liabilities and equity of the company.
b. Income statement and statement of...