Details

Technical Note

Statement of Cash Flows: Preparation, Analysis & Linkages

Asad Alam

INDUSTRY : Cement

AREA : Accounting & Control

ORGANIZATION : Lucky Cement Limited Company

LENGTH : 34

LUMS No : 01-002-2014-2

PUBLICATION YEAR : 2014

KEYWORDS:

Lucky Cement,Statement of Cash Flows,Analysis,Investment,Financial Position,Balance Sheet,Financial Operations,Success or Failure,Cash Flow Statement Analysis

DESCRIPTION:

How was Lucky Cement Limited Company able to invest Rs. 5.6 billion in a long-term investment while still paying cash dividends of nearly Rs. 2 billion in the year ended 2013? How was the company able to pay back over Rs. 6.5 billion of short and long term debts in the year ended 2012? How did the cash and bank balance account for Honda Atlas Pakistan increase from Rs. 82 million in the March 31, 2012 year-end Statement of Financial Position to Rs. 3.5 billion in the year-end 2013 balance sheet? How was PIA able to invest nearly Rs. 8 billion in property, plant and equipment in 2012 while reporting a net loss of Rs. 33 billion in the same year? Such questions are often asked by those interested in the financial operations of a business enterprise, e.g. investors, creditors, top management and board of directors. Balance sheets, income statements and statements of equity often fail to provide answers to these questions; therefore companies are required to prepare a fourth primary financial statement i.e. the statement of cash flows. This note discusses the following: A) Classification of Cash Flows B) Reporting Cash Flows from Operating Activities C) Steps in Preparing the Cash Flow Statement D) Cash Flow Statement Analysis.

LEARNING OBJECTIVES:

N/A

SUBJECTS COVERED:

Accounting & Control