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The Statement of Cash Flows

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  1. The Statement of Cash Flows

  2. Cashflows Statement Laporan Arus Kas atau Laporan Aliran Kas?

  3. Purpose of The Statement ofCash Flows: Basic Concepts The statement of cash flows reports the entity’s cash flows (cash receipts and cash payments) during the period.

  4. Purposes of the Statementof Cash Flows 12/31/x1 For the Year Ended 12/31/x2 12/31/x2 (a point in time) (a period of time) (a point in time) Income Statement Balance Sheet Balance Sheet Statement of Retained Earnings Statement of Cash Flows

  5. Purposes of the Statementof Cash Flows • The statement of cash flows is designed to fulfill the following: • predict future cash flows • evaluate management decisions • determine the ability to pay dividends plus interest and principal • show the relationship of net income to changes in the firm’s cash

  6. Key question • How much cash is the company generating from its operating? • Is this enough for the company’s needs? • Is it possible to make estimates or projections of the company’s future cash flows. In order to improve the assesment of its creditworthiness?

  7. Basic Organization of theStatement of Cash Flows • A business may be evaluated in terms of three types of business activities: • Operating activities • Investing activities • Financing activities

  8. Operating Activities Operating activities are related to the transactions that make up net income. Operating activities also affect current assets and current liabilities on the balance sheet.

  9. Investing Activities Investing activities increase and decrease the assets that are available to the business. Investing activities are related to the Long-Term Asset accounts.

  10. Financing Activities These are transactions involving obtaining resources from the owners or returning resources to them. It also involves obtaining resources from creditors and repaying the amount borrowed.

  11. Format of the Statementof Cash Flows • FASB Statement 95 approved two methods for reporting cash flows from operating activities. • Indirect method • Direct method

  12. Analysis • Look at the amount of cash flows from operating after paying interest, tax and (if any) dividends. • Operational cashflow- (interest+ tax+dividen)

  13. Ratio analysis • Debt Service Ratio: Operational Cash Flows/Priority Cash Flows DSR Ratio of less than 2 would be uncomfortable Priority Cash flows= interest+taxation Priority Cash Flows = interest+Taxation+deviden

  14. Tugas untuk didiskusikan dalam kelas • Lakukanlah analisis cashflows terhadap laporan keuangan PT Mustika Ratu Tbk.