Cash flow statement yef

CASH FLOW STATEMENT | Harini Srinivasamoorthy
CASH FLOW STATEMENT
(WITH EXAMPLE)
 What is cash flow statement?
 Purpose and importance
 Applicability
 Definitions of certain terms used in cash flow statement
 Classification of cash flow statement
 Preparation of cash flow statement
 Reporting cash flow statement
 Real Example

WHAT IS CASH FLOW STATEMENT?
A Cash Flow Statement (also called the Statement of Cash Flows) shows how much cash is
generated and used during a given time period. (e.g., a month, quarter, or year).
The main categories found in a cash flow statement are (1) operating activities, (2) investing
activities, and (3) financing activities of a company and are organized respectively.
PURPOSE & IMPORTANCE OF CASH FLOW STATEMENTS
 Provides important insights about the liquidity and solvency of a company.
 It enables analysts to use the information about historic cash flows for projections of
future cash flows of an entity on which to base their economic decisions.
 By summarizing key changes in financial position during a period, cash flow statement
serves to highlight priorities of management.
 Comparison of cash flows of different entities helps reveal the relative quality of their
earnings
 cash flow information is more objective as opposed to the financial performance
reflected in income statement.
APPLICABILITY OF AS 3 CASH FLOW STATEMENTS
Cash flow statements are to be prepared by all companies but the act also specifies a
certain category of companies which are exempted from preparing the same. Such
companies are One Person Company (OPC), Small Company and Dormant
Company. *

*♦ OPC means a company which has only one single person as its member.
♦ A Small Company is a private company with a maximum paid up capital of Rs. 50 lakhs and a
maximum turnover of Rs. 2 crores.
♦ A Dormant Company is an inactive company.
DEFINITIONS ON CERTAIN TERMS:
Cash Flow: Inflows and outflows of cash and cash equivalents
Cash Balance: Cash on hand and demand deposits (cash balance on the balance sheet)
Cash Equivalents: Cash equivalents include cash held as bank deposits, short-term investments,
and any very easily cash-convertible assets – includes overdrafts and cash equivalents with
short-term maturities (less than three months).
FINANCIAL STATEMENT INCLUDES
1. Balance
sheet
2. Profit & loss
account/ income
& expenditure
account
3. Cash flow
statement
4. Statement
of changes in
equity
5. Explanatory
notes
CLASSIFICATION OF CASH FLOW STATEMENT
1.Operating Activities: The
principal revenue-generating
activities of an organization and
other activities that are not
investing or financing;
1.Investing Activities: Any cash
flows from the acquisition and
disposal of long-term assets and
other investments not included in
cash equivalents
Financing Activities: Any cash
flows that result in changes in
the size and composition of
the owners’ capital (including
preference share capital in the
case of a company) and
borrowing of the enterprise

EXAMPLES OF CASH FLOWS OF
OPERATING ACTIVITIES INVESTING ACTIVITIES FINANCING ACTIVITIES
(a) cash receipts from the
sale of goods and the
rendering of services
(a) cash payments to acquire fixed
assets (including intangibles).
These payments include those
relating to capitalised research and
development costs and self-
constructed fixed assets;
(a) cash proceeds from
issuing shares or other
similar instruments;
(b) cash receipts from
royalties, fees, commissions
and other revenue;
(b) cash receipts from disposal of
fixed assets(including intangibles)
(b) cash proceeds from
issuing debentures, loans,
notes, bonds, and other
short or long-term
borrowings; and
(c) cash payments to
suppliers for goods and
services;
(c) cash payments to acquire
shares, warrants or debt
instruments of other enterprises
and interests in joint ventures
(other than payments for those
instruments considered to be cash
equivalents and those held for
dealing or trading purposes);
(c) cash repayments of
amounts borrowed i.e.
redemption of debentures,
bonds etc.
(d) cash payments to and on
behalf of employees;
(d) cash receipts from disposal of
shares, warrants or debt
instruments of other enterprises
and interests in joint ventures
(other than receipts from those
instruments considered to be cash
equivalents and those held for
dealing or trading purposes);
(d) cash payments to
redeem preference shares.
(e) cash receipts and cash
payments of an insurance
enterprise for premiums and
claims, annuities and other
policy benefits;
(e) cash advances and loans made
to third parties (other than
advances and loans made by a
financial enterprise);

(f) cash payments or refunds
of income taxes unless they
can be specifically identified
with financing and investing
activities; and
(f) cash receipts from the
repayment of advances and loans
made to third parties (other than
advances and loans of a financial
enterprise);
(g) cash receipts and
payments relating to futures
contracts, forward contracts,
option contracts and swap
contracts when the
contracts are held for
dealing or trading purposes.
(g) cash payments for futures
contracts except when the
contracts are held for dealing or
trading purposes, or the payments
are classified as financing activities;
and
(h) cash receipts from futures
contracts except when the
contracts are held for dealing or
trading purposes, or the receipts
are classified as financing activities.

PREPARATION OF CASH FLOW STATEMENT:
The following three basic information is required for the preparation of a cash flow statement:
(i) Comparative Balance Sheets: Balance sheets at the beginning and at the end of the
accounting period indicate the amount of changes that have taken place in assets, liabilities and
capital.
(ii) Statement of Profit & Loss: The Statement of Profit & Loss of the current period enables to
determine the amount of cash provided by or used in operations during the accounting period
after making adjustments for non-cash, current assets and current liabilities.
(iii) Additional data: In additions to the above statements additional data are collected to
determine how cash has been provided or used e.g. sale or purchase of assets for cash.
The following procedure may be used for the preparation of a cash flow statement:
(a) Calculation of net increase (decrease) in cash and cash equivalents accounts. The difference
between cash and cash equivalents for the period may be computed by comparing these
accounts given in the comparative balance sheets. The results will be cash receipts and
payments during the period responsible for the increase or decrease in cash and cash
equivalent items.
(b) Calculation of the net cash provided (used) by operating activities. It is by the analysis of
Statement of Profit & Loss, comparative balance sheet and selected additional information.
(c) Calculation of the net cash provided (used) by investing and financing activities. All other
changes in the balance sheet item must be analysed taking into account the additional
information and effect on cash may be grouped under the investing and financing activities.
(d) Preparation of a cash flow statement. It may be prepared by classifying all cash inflows and
outflows in terms of operating, investing and financing activities. The net cash flow provided by
(used) in each of the three activities may be highlighted.
(e) Ensure that the aggregate of net cash flows from operating, investing and financing activities
is equal to net increase (decrease) in cash and cash equivalents.
(f) Report any significant investing/financing transactions that did not involve cash or cash
equivalents in a separate schedule to the cash flow statement.

REPORTING OF CASH FLOW STATEMENT
An enterprise should report CASH FLOWS FROM OPERATING ACTIVITIES using either:
REPORTING UNDER THE DIRECT METHOD
The Cash flow statement under Direct method is prepared as follows:
Cash flow from Operating activities
Add: Operating cash receipts: (A)
Cash sales xxx
Cash received from customers xxx
Trading commission received xxx
Royalties received xxx xxx
Less: Operating cash payments: (B)
Cash purchase (xxx)
Cash paid to suppliers (xxx)
• Cash receipts from operating revenues and
cash payment for operating expenses are
calculated and shown in the cash flow
statement.DIRECT METHOD
• Operating activities is determined by making
necessary adjustments in the net profit (or
loss) as disclosed by profit and loss account
INDIRECT METHOD

Cash paid for business expenses (xxx) (xxx)
Cash generated from operations (A-B) = (C) xxx
Less: Income tax paid (Net of tax refund received) (D) (xxx)
Cash flow before extraordinary items (C-D) = (E) xxx
Adjusted extraordinary items (+/–) (F) xxx
Net cash flow from operating activities (E-F) = (G) xxx
REPORTING UNDER INDIRECT METHOD
The cash flow from operating activities are derived under two stages;
A. Calculating the operating profit before changes in working capital
B. The effect of changes in working capital
Net profit before Tax and extra ordinary Items xxx
Add: Non-cash and non-operating Items which have already been debited
to profit and Loss Account like;
Depreciation xxx
Amortisation of intangible assets xxx
Loss on the sale of Fixed assets xxx
Loss on the sale of Long-term Investments xxx
Provision for tax xxx
Dividend paid xxx xxx
Less: Non-cash and Non-operating Items which have already been credited
to Profit and Loss Account like
Profit on sale of fixed assets xxx
Profit on sale of Long term investment xxx xxx
Operating profit before working Capital changes xxx
(Add) Net decrease in current asset xxx
(Add) Net increase in Current liabilities Xxx

(less) Net Increase in current asset Xxx
(Less) Net decrease in current liabilities xxx
Cash generated from operating activites xxx
Direct tax paid ( Net) Xxx
Net cash from operating activites xxx
a. Current Assets
INCREASE IN CURRENT ASSET DECREASE IN CASH INFLOW (because cash is
blocked in current assets)
DECREASE IN CURRENT ASSET INCREASE IN CASH INFLOW (because cash is
released from the sale of current assets)
b. Current Liabilities
INCREASE IN CURRENT LIABILITY DECREASE IN CASH OUTFLOW (because cash is
saved)
DECREASE IN CURRENT LIABILITY INCREASE IN CASH OUTFLOW (because of
payment of the liability)
CASH FLOWS FROM INVESTING ACTIVITIES
Separate disclosure of Cash Flows arising from Investing Activities is important because the
Cash Flows represent the extent to which expenditures have been made for resources intended
to generate future income and cash flows.
Format of Cash Flow from Investing Activities:-
Particulars Amount
Purchase of Fixed Assets (xxx)
(Add) Proceeds from Sale of Fixed Assets xxx
(Add) Interest received xxx
(Add) Dividend received xxx

Net Cash Flow from Investing Activities xxx
CASH FLOWS FROM FINANCING ACTIVITIES
The separate disclosure of cash flows arising from financing activities is important because it is
useful in predicting the claims on future cash flows by the providers of funds.
Format of Cash Flow from Financing Activities:-
Particulars Amount
Proceeds from Issue of Share Capital xxx
Proceeds from Long Term Borrowings xxx
Repayment of Long Term Borrowings (xxx)
Interest Paid (xxx)
Dividend Paid (xxx)
Net Cash Flows from Financing Activities xxx
The Comprehensive Format of the complete Cash Flow Statement is as follows:-
Particulars Amount
Cash flow from Operating Activities (Direct Method/ Indirect Method) xxx
(Add) Cash Flow from Investing Activities xxx
(Add) Cash Flow from Financing Activities xxx
(=)Net Increase/Decrease in Cash xxx
(Add) Opening Balance of Cash & Cash Equivalents xxx
(=) Closing Balance of Cash & Cash Equivalents xxx

EXAMPLE
COMPANY NAME INDUSTRY TYPE
Reliance Industries Limited Conglomerate*
Axis Bank Finance
*(A conglomerate is a multi-industry company – i.e., a combination of multiple business entities operating in
entirely different industries under one corporate group, usually involving a parent company and many subsidiaries.
Conglomerates are often large and multinational.)

RELIANCE INDUSTRIES LIMITED
CASH FLOW STATEMENT
For the year ended 31st March, 2019
(` in crore)
2018-19 2017-18
A. CASH FLOW FROM OPERATING ACTIVITIES
Net Profit Before Tax as per Statement of Profit and
Loss
47,367 45,725
Adjusted for:
(Profit) / Loss on Sale / Discard of Property, Plant and
Equipment (Net)
(15) (8)
Depreciation / Amortisation and Depletion Expense 10,558 9,580
Effect of Exchange Rate Change (1,540) (1,903)
Net Gain on Financial Assets (2,605) (3,446)
Dividend Income (449) (935)
Interest Income (5,761) (3,586)
Finance Costs 9,751 4,656
Operating Profit before Working Capital Changes 57,306 50,083
Adjusted for:
Trade and Other Receivables (19,777) (11,397)
Inventories (4,575) (5,550)
Trade and Other Payables 9,300 37,479
Cash Generated from Operations 42,254 70,615
Taxes Paid (Net) (9,426) (8,615)
Net Cash Flow from Operating Activities * 32,828 62,000
B. CASH FLOW FROM INVESTING ACTIVITIES
Purchase of Property, Plant and Equipment and Intangible
Assets
(24,971) (24,700)
Proceeds from disposal of Property, Plant and Equipment
and Intangible Assets
103 75
Investments in Subsidiaries / Trusts (28,827) (34,973)
Disposal of Investments in Subsidiaries 97 -
Purchase of Other Investments (10,05,611) (4,99,789)
Proceeds from Sale of Financial Assets 10,17,713 5,04,318
Net Cash Flow for Other Financial Assets (19,150) (7,136)
Interest Income 2,612 2,162
Dividend Income from Associates 3 12
Dividend Income from Others 445 922
Net Cash Flow used in Investing Activities (57,586) (59,109)

C. CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from Issue of Equity Share Capital 117 125
Share Application Money 2 15
Proceeds from Borrowing - Non-Current 23,989 28,328
Repayment of Borrowing - Non-Current (6,594) (11,344)
Borrowing - Current (Net) 24,147 (7,855)
Dividend Paid (including Dividend Distribution Tax) (4,282) (3,916)
Interest Paid (11,584) (7,267)
Net Cash Flow from / (used) in Financing Activities 25,795 (1,914)
Net Increase in Cash and Cash Equivalents 1,037 977
Opening Balance of Cash and Cash Equivalents 2,731 1,754
Closing Balance of Cash and Cash Equivalents **
(Refer Note 8)
3,768 2,731
Amount spent in Cash towards Corporate Social Responsibility is ` 849 crore (Previous Year ` 745 crore).
** Include towards Unclaimed Dividend of ` 235 crore (Previous Year ` 259 crore).
CHANGE IN LIABILITY ARISING FROM FINANCING ACTIVITIES
(` in crore)
1st April,
2018
Cash flow
Foreign
exchange
movement
31st March,
2019
Borrowing - Non-Current
(Refer Note 15)
1,01,642 17,395 3,586 1,22,623
Borrowing - Current (Refer
Note 19)
15,239 24,147 (289) 39,097
1,16,881 41,542 3,297 1,61,720
(` in crore)
1st
April,
2017
Cash
flow
Foreign
exchange
movement
31st
March,
2018
Borrowing - Non-Current (Refer Note
15)
84,866 16,984 (208) 1,01,642
Borrowing - Current (Refer Note 19) 22,580 (7,855) 514 15,239
1,07,446 9,129 306 1,16,881

NOTE 8:
COMMENTS:
To understand the following companies’ examples, we have to analyse the balance sheets,
statement of profit and loss and additional data (if required). Because all the information above
are based on the difference between the last year data (2018) and current year data (2019) of
data.
For instance. In reliance Industry limited cash flow statement, the net profit before tax for the
year (2019) was Rs. 47,367 (In crores) but the net increase in cash and cash equivalents is Rs.
1,037. By this, what we can understand is there is increase in net cash and cash equivalents from
last year 2018.
Rough Draft of reliance cash flow statement. 31/3/2019 31/3/2018
Net profit before tax 47,367 45,725
Net cash flow from operating activities 32,828 62,000
Net cash flow from Investing activities (57,586) (59,109)
Net cash flow from finance activities 25,795 (1,914)
Net Increase in cash and cash equivalents 1,037 977
Opening balance of cash and cash equivalents 2,731 1,754
Closing balance of cash and cash Equivalents 3,768 2,731

AXIS BANK
Cash Flow Statement
Year ended
31-03-2019
(` in Thousands)
Yearended
31-03-2018
Cash flow from operating activities
Net profit before taxes 69,740,881 1,215,715
Adjustments for:
Depreciation on fixed assets 7,097,249 5,680,974
Depreciation on investments 3,000,160 (2,110,133)
Amortisation of premium on Held to Maturity investments 3,207,410 2,819,661
Provision for Non Performing Assets (including bad debts) 102,214,828 165,987,074
Provision on standard assets 8,097,890 (1,350,017)
Provision on unhedged foreign currency exposure 187,900 (93,000)
Profit/(loss) on sale of land, buildings and other assets (net) 229,014 163,809
Provision for country risk - (199,434)
Provision for restructured assets/strategic debt restructuring/sustainable structuring (196,572) (3,071,587)
Provision for other contingencies 7,005,966 (4,433,847)
Dividend from Subsidiaries (1,311,000) (2,560,608)
199,273,726 162,048,607
Adjustments for:
(Increase)/Decrease in investments (40,070,291) (174,381,077)
(Increase)/Decrease in advances (649,869,997) (811,747,986)
Increase /(Decrease) in deposits 948,486,186 392,439,345
(Increase)/Decrease in other assets (106,579,694) (16,147,141)
Increase/(Decrease) in other liabilities & provisions 52,991,110 8,353,896
Direct taxes paid (28,561,806) (30,059,243)
Net cash flow from operating activities 375,669,234 (469,493,599)
Cash flow from investing activities
Purchase of fixed assets (8,316,648) (8,224,338)
(Increase)/Decrease in Held to Maturity investments (178,957,069) (89,688,722)
Purchase of Freecharge business - (3,954,556)
Increase in Investment in Subsidiaries (1,934,115) (3,250,000)
Proceeds from sale of fixed assets 531,616 114,565
Dividend from Subsidiaries 1,311,000 2,560,608
Net cash used in investing activities (187,365,216) (102,442,443)

Year ended
31-03-2019
(` in Thousands)
Yearended
31-03-2018
Cash flow from financing activities
Proceeds/(Repayment) from issue of subordinateddebt,perpetual debt & upper Tier
II instruments (net)
(17,000,000) 81,109,364
Increase/(Decrease) in borrowings (excluding subordinated debt, perpetual debt &
upper Tier II instruments)(net)
64,596,346 348,743,388
Proceeds from issue of share capital 10,212 343,006
Proceeds from share premium (net of share issue expenses) 1,706,853 87,864,789
Payment of dividend (including dividend distribution tax) - (14,052,756)
Net cash generated from financing activities 49,313,411 504,007,791
Effect of exchange fluctuation translation reserve (119,982) (84,674)
Net increase in cash and cash equivalents 237,497,447 (68,012,925)
Cash and cash equivalents at the beginning of the year 434,548,906 502,561,831
Cash and cash equivalents at the end of the year 672,046,353 434,548,906
Notes to the Cash Flow Statement:
1. Cash and cash equivalents includes the following
Cash and Balances with Reserve Bank of India (Refer Schedule 6) 350,990,339 354,810,577
Balances with Banks and Money at Call and Short Notice (Refer Schedule 7) 321,056,014 79,738,329
Cash and cash equivalents at the end of the year 672,046,353 434,548,906
2. Amount of Corporate Social Responsibility related expenses spent during the
year in cash
`137.02 crores (previous year `126.50 crores)

THANK YOU,
BY HARINI SRINIVASAMOORTHY

Cash flow statement yef

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