Week 5 Measuring and Reporting Cash Flows ACCY111 2013 FOR BLACKBOARD

Net decrease in cash and cash equivalents held 7 cash

Info icon This preview shows pages 33–38. Sign up to view the full content.

View Full Document Right Arrow Icon
Net decrease in cash and cash equivalents held (7) Cash and cash equivalents at the beginning of the financial year 12 Cash and cash equivalents at the end of the financial year 5
Image of page 33

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Reconciling Cash Flow From Operations With Operating Profit NZ IAS 7 requires a note that reconciles the net profit or loss after tax (per the Income Statement) with the cash flows from operating activities (per the Cash Flow Statement) Purpose of reconciliation is to allow users of financial reports to understand the differences between the net profit or loss and the cash flows from operating activities The starting point is the profit after tax We then add back the depreciation charged in arriving at that profit and adjust this total by movements in non-cash current asset and current liability accounts to arrive at cash flow from operations
Image of page 34
Reconciling Cash From Operations With Operating Profit Refer Example 5.1 for data Reconciliation would be as follows: $m Operating profit after tax 10 Depreciation 5 Increase in inventory (8) Increase in accounts receivable (5) Increase in accounts payable 5 Increase in tax payable 1 Net cash flow provided by operating activities 8
Image of page 35

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
What Does the Cash Flow Statement Tell Us? The cash flow statement tells us how the business has generated cash during the period and where that cash has gone It tracks the sources and uses of cash over time, which is indicative of trends and useful for predicting future opportunities and patterns of cash flow It provides an insight into working capital management It identifies non-operating cash flows
Image of page 36
What Does the Cash Flow Statement Tell Us? It indicates the entity’s ability to pay dividends and meet its financial commitments as they fall due It enables comparison of how current period cash flows compare to prior periods The differences between net profit and net cash flow from operating activities essentially assist a “Quality ” check on Earnings
Image of page 37

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Limitations of cash flow statements Cash flows can be manipulated . Cash flow information is historical information and cannot necessarily assist predictions of the future. Much of the detailed information is in the notes , and careful review of the notes must occur.
Image of page 38
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern