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ACCOUNTING & FINANCIAL SYSTEMS MCPC 606
STATEMENT OF CASH FLOW
LECTURERS:
DR. JOHN MACCARTHY
&
DR. MALIK ZAKARIA 1
Statement of Cash Flow
Financial Statements:
• Statement of Comprehensive Income
• Statement of Financial Position
• Statement of Cash Flow
How to prepare cash flow statement?
• Statement of Cash flow is prepared from the SOCI and SOFP2
Statement of Cash Flow
Definition of Cash?
• The definition of cash include cash and cash equivalent.
• Cash includes notes, coins and bank account balances.
Cash equivalent includes:
• Short terms highly liquid instruments meaning less than 90 days (fixed deposit).
3
• Treasury bills (Tbills).
Statement of Cash-flow
The importance of liquidity in a business:
• It shows the company’s ability to generate enough cash for running the business.
• It shows how the company utilise cash to achieve the objective of the company.
• It reveals how much can be generated within and how much does the business
needed to finance from outside sources.
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Assessing the liquidity of a business is a means of determining the financial “health”
Statement of Cash-flows (cont.)
Difference between Cashflow and Profitability
• Cashflows show cash movements in terms of cash receipts and payments for any
economic activities within the company.
• Profit is the difference between revenue and expenses paid within a specific period.
• A compa.ny can be profitable and still be bankrupt because of cashflows difficulties
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