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Cash flow statement and report - Case Study Example

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1. Cash Flow Statement Amount in $ Net Income 50,000 Adjustment for non-cash items Depreciation 60,000 Loss on sale of asset 10,000 (Increase) / Decrease in operating assets Accounts Receivable (41,000) Prepaid Insurance (9,000) (Increase) / Decrease in operating liabilities Accounts Payable 5,000 Salaries Payable 5,000 Income taxed Payable (10,000) Bank loan payable (75,000) Net cash flow from operating activities (5,000) Cash flow from investing activities Property, Plant and equipment (125,000) Sale proceed from sale of land 90,000 Sale proceed from sale of equipment 20,000 (15,000) Cash flow from financing activities Dividend paid (5,000) (5,000) (Decrease) / Increase in cash and cash equ…
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Cash flow statement and report
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Cash flow statement and report

Download file to see previous pages... No figure of tax is mentioned in the profit and loss statement of the company so it is assumed that the net income is profit before tax and the tax paid is incorporated in the tax payable figure. From the net income non cash adjustments have been made such depreciation and loss recorded on sale of fixed asset. Since these items were charged to the profit and loss account, these are added back to the net income. In addition the net increase decrease is calculated in the current assets and liabilities. If the asset has decreased from the previous year it would be taken as cash inflow. This can be understood by considering accounts receivable for example. If the account receivable has decreased this means that the debtor has paid cash (the company would have made the entry Cash: Debit and Accounts receivable: credit) and thus it is taken as cash inflow. ...
pany purchased property, plant and equipment amounting to $ 125,000 whereas it received cash from the disposal of some of its property, plant and equipment amounting to $110,000. All in all, the cash flow is showing a net decrease of $25,000 as compared to the previous year. (b) The board of directors of the company needs to decide whether the funding should be equity based or debt based. Both modes of financing i.e. equity and debt have their own advantages and disadvantages. There are several factors which need to be considered before taking such decisions. For example statutory rules and requirements, terms and conditions imposed by the counter party and general economic conditions are analyzed before selecting one of the options. One of the major drawbacks of raising finance equity through issuance of equity is the fact that a lot of secretarial procedure is involved in raising such finance in contrast to acquiring financing directly from any bank. Most of the time, financing from any bank or financial institution is acquired by just filing an application with the bank or financial institution. The banks usually have their own procedure of screening where they evaluate the credit history, financial outlook, liquidity and other aspects of the company. Most importantly, the bank’s analyze the fact and ability of the company pertaining to the ability of the company to repay the amount of loan in the future. When it comes to raising finances through issuance of equity shares, the company is liable to fulfill several requirements such as making sure that a certain number of shares are issued in accordance with the listing regulations of the stock exchange, submitting a due diligence report to the share holder and issuing share to the current shareholder in accordance ...Download file to see next pagesRead More
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