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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. 4 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 5 ... - tailieumienphi.vn
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