Cash Flow Reporting and Analysis
TOPIC 3 – L E CT U R E S 5 & 6
Cash flow reporting and analysis
REVISED BY DR SIMONA SCARPARO (FEBRUARY 2013). EARLIER R E V I S E D B Y D R G U S
H O S S A R I ( J A N U A R Y 2 0 1 0 ) , B A S E D O N O R I G I N A L M AT E R I A L P R E PA R E D
BY GARRY CARNEGIE, GRAEME W INE, CHRISTINE JUBB AND JUDY
NAGY
Contents
Lectures 5 & 6: Introduction
1
Objectives
1
Learning resources
1
Prescribed text
Online readings
Glossary
CloudDeakin
1
2
2
2
Importance of cash flow information
2
Enhancing predictions of possible future cash flows
Explaining the relationship between profit and cash flows
Evaluating m anagem ent perform ance
Theoretical perspectives
3
3
3
4
Cash flow format
5
Deriving cash flow information
5
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Net cash flow
5
6
6
7
Review questions
Bibliography
11
Further resources
12
Suggested answers
13
Exercises
13
Review questions
© Deakin University
10
16
Financial Reporting and Analysis
Lectures 5 & 6: I ntr oducti on
W hile the statem ent of comprehensive incom e (also known as the incom e statem ent) and the statem ent of financial position (also known as the balance sheet) reveal m uch about the past, present and even the future of the firm ; there is
– nevertheless – inform ation that is not clearly revealed in these two statem ents.
For exam ple, while overall changes in net assets m ight be associated with profit or loss for the period, the reasons for specific changes in the balance of cash at period end are not clear. Likewise, while the statem ent of com prehensive incom e reveals the operating result for the period, it does not show the relative im pact of non-cash transactions such as credit sales and accrued expenses on this result.
Further, neither of these two statem ents show other aspects of the entity’s
Cash flow reporting and analysis
REVISED BY DR SIMONA SCARPARO (FEBRUARY 2013). EARLIER R E V I S E D B Y D R G U S
H O S S A R I ( J A N U A R Y 2 0 1 0 ) , B A S E D O N O R I G I N A L M AT E R I A L P R E PA R E D
BY GARRY CARNEGIE, GRAEME W INE, CHRISTINE JUBB AND JUDY
NAGY
Contents
Lectures 5 & 6: Introduction
1
Objectives
1
Learning resources
1
Prescribed text
Online readings
Glossary
CloudDeakin
1
2
2
2
Importance of cash flow information
2
Enhancing predictions of possible future cash flows
Explaining the relationship between profit and cash flows
Evaluating m anagem ent perform ance
Theoretical perspectives
3
3
3
4
Cash flow format
5
Deriving cash flow information
5
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Net cash flow
5
6
6
7
Review questions
Bibliography
11
Further resources
12
Suggested answers
13
Exercises
13
Review questions
© Deakin University
10
16
Financial Reporting and Analysis
Lectures 5 & 6: I ntr oducti on
W hile the statem ent of comprehensive incom e (also known as the incom e statem ent) and the statem ent of financial position (also known as the balance sheet) reveal m uch about the past, present and even the future of the firm ; there is
– nevertheless – inform ation that is not clearly revealed in these two statem ents.
For exam ple, while overall changes in net assets m ight be associated with profit or loss for the period, the reasons for specific changes in the balance of cash at period end are not clear. Likewise, while the statem ent of com prehensive incom e reveals the operating result for the period, it does not show the relative im pact of non-cash transactions such as credit sales and accrued expenses on this result.
Further, neither of these two statem ents show other aspects of the entity’s
Bibliography: The prescribed text, Bazley and Hancock (2013) also provides a glossary – at the