Statement of cashflows

• Section 1: (Operating activities)- Add profit from operations
• Add depreciation because it is a non cash adjustment
• Add loss on disposal of non-current assets as it is an expense when calculating 'profit from operations' but it is not a cash outflow.
• Subtract Profit on disposal of non-current assets as it is income when calculating 'profit from operations' but it is not a cash inflow.
• Add decrease in inventory as it is good for cash flow
• Subtract increase in inventory as it is bad for cash flow
• Add decrease om trade receivables as it is good for cash flow
• Subtract increase in trade receivables as it is bad d for cash flow
• Add increase in trade payables as it is good for cash flow
• Subtract decrease in trade payables as it is bad for cash flow
• Cash from operating activities: if the total of this section is positive
• Cash used in operating activities: if the total of this section is negative
• Subtract interest paid. It may be called 'finance cost' on the income statement. It is an outflow
• Subtract tax paid. This is the corporation tax paid during the year, which is an outflow
• equals net cash from operating activities (if the total of this section is positive) OR
• Net cash used in operating activities (if the total of this section is negative)
• Section 2: Investing activities
• Add sale of non-current assets as the disposal proceeds are an inflow
• Subtract purchase of non-current assets as their cost is an outflow
• Add interest received and dividends received as they are inflows.
• equals to cash from investing activities (if the total of this section is positive)
• OR cash used in investing activities (if the total of this section is negative)
• Section 3: Financing activities
• Add issue of shares, including share premium as the share issue is an inflow, unless it is a bonus issue.
• Add new loans or debentures as the cash received is an inflow.
• Subtract repayment of loans, debentures or shares as their repayment is an outflow.
• Subtract dividends paid as they are outflows
• equals to cash from financing activities (if the total of this section is positive) OR
• Cash used in financing activities if the total of this section is negative
• Change in cash and cash equivalents:
• Net increase/decrease in cash and cash equivalents: this is the total of the three sections. If negative, it is shown in brackets.
• Cash and cash equivalents at the beginning of the year: from last years statement of financial position. A bank overdraft is negative.
• Cash and cash equivalents at the end of the year: From this year's statement of financial position. A bank overdraft is a negative.