In the financial accounting concept, the cash flow statement is a statement which is determined by subtracting the net cash outflow with the net cash inflow and the net cash outflow. It is a statement which summarises the net cash and cash equivalent while leaving a company. Hence the cash flow measures the process of how well a company could manage the net cash and cash equivalent and how well they could pay all the debts and obligations of the company. Thus the company cash flow statement provides complement in the balance sheet. However the company balance sheet and the income statement is always a mandatory part of the company’s financial report all together.
The main purpose of the cash flow statement is to identify the major cash flows occurring from the same period of the company’s income statement and in between the major balance sheet. Hence the cash flow statement do generally have three types of clarifications namely-
Therefore the cash flow statement is fully relied on these three types which are considered as highly important part. The operating, investing and financing activities are been considered as major source to conduct net cash flows. However due to the cash flow process the net cash and cash equivalent are been changed to the extent. Apart from this it is also seen that the cash flow statement is highly required to discontinue any kind of information, including the amount of interest paid , income taxes amount paid and any kind of significant investing and financial activities which dos not ultimately required any kind of cash amount.
The main items which are most important to form the cash flow statement are-
Cash flow from operating activities:
It is an operating format that indicates the amount of money a company which brings from the ongoing regular business activities such as manufacturing and selling of goods and services. Thus the cash flow from operating activities does not include any long term activities or any kind of capital investment cost and it may be considered as one time activities.
Cash flow from investing activities.
It is a cash flow item which reports an aggregate item in the cash flow statement and verifies the change in the company cash positions resulting to the gains and losses from the resultant change on the amount spend on investment in capital assets such as plant and equipment.
Cash flow from financing activities:
It is the section to the company cash flow statement which shows the net cash flow statement and in which the net cash are been used to fund the company. Hence the financial activities include the net debt , equity and dividend values .
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