Question

1. List the various types of transactions that impact and the direction of the impact on reporting Cash Flows from Investing.

2. List the various types of transactions that impact and the direction of the impact on reporting Cash Flows from Financing.

3. What information does the Stmt of Cash Flows provide?

Answer 1

1. Cash flows from investing activities provides an account of cash used in the purchase of non-current assets or long term assets which will deliver value in the future or cash invested in long term assets

Transactions impacting cashflows from investing activities are:

1. Purchase of fixed assets - cash flow negative
2. Purchase of investments such as stocks or securities - cash flow negative
3. Lending money - cash flow negative
4. Sale of fixed assets - cash flow positive
5. Sale of investment securities - cash flow positive
6. Collection of loans and insurance proceeds - cash flow positive

2. Cash generated or spent on financing activities shows the net cash flows involved in funding the company's operations.

Transactions impacting cashflows from financing activities are:

1. Issuing equity or stock, which is sold to investors - cashflow positive
2. Borrowing debt from a creditor or bank - cashflow positive
3. Issuing bonds, which is debt that investors purchase - cashflow positive
4. Stock repurchases - cashflow negetive
5. Paying Dividends - cashflow negetive
6. Paying Interest on debt - cashflow negetive
7. Repayment of debt (loans taken, debentures issued etc) - cashflow negetive
   

3. A cash flow statement is a financial statement that summarizes the amount of cash and cash equivalents entering and leaving a company. The cash flow statement measures how wellan entity manages its cash. It  is a budget summary that gives data about the changes in cash and cash equivalents of a business.

A Cashflow statement :-

1. Provide information about cash receipts, cash payments in an enitity
2. Provide information about net change in cash resulting from the operating, investing, and financing activities of a company during the period
3. Provide information about the ability of the entity to generate cash.
4. Provide information about how the funds are utilised for the operations in the entity.
5. Helps in verifying Profitability and Liquidity Positions.
6. Helps in Verifying Capital Cash Balance
7. Helps in Cash Management., Planning and Coordination.
8. help in knowing the liquidity / actual cash position of the entity which funds flow and P&L are unable to specify.