DFS cash flow

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meibaker
meibaker Registered Posts: 481 Dedicated contributor 🦉
anyone has a easyy way to remember the cash flowadjustments, which is add and which is deduct.
thanks

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  • jewels.p
    jewels.p Registered Posts: 1,774 Beyond epic contributor 🧙‍♂️
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    The key to deciphering when to add or to subtract from operating profit is to determine the effect of the cash flow.

    Consider an increase in inventories. An increase means that we have spent more cash on inventories which may not yet have turned into receivables and thus not yet turned into cash. This therefore results in a cash outflow and outflows are deducted.

    Payment received from customers is an inflow of cash therefore you add it.

    So just think what effect the transaction has before you add or subtract.

    Is that any help to you?
  • meibaker
    meibaker Registered Posts: 481 Dedicated contributor 🦉
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    jewels.p wrote: »
    The key to deciphering when to add or to subtract from operating profit is to determine the effect of the cash flow.

    Consider an increase in inventories. An increase means that we have spent more cash on inventories which may not yet have turned into receivables and thus not yet turned into cash. This therefore results in a cash outflow and outflows are deducted.

    Payment received from customers is an inflow of cash therefore you add it.

    So just think what effect the transaction has before you add or subtract.

    Is that any help to you?

    THANKS JEWELS! its defo a good way to learn! A+++++
  • meibaker
    meibaker Registered Posts: 481 Dedicated contributor 🦉
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    hi jewel:
    i didn't get gain on sale of non-current asset, it should be cash inflows? so it should add instead of deduct??
  • Rinske
    Rinske Registered Posts: 2,453 Beyond epic contributor 🧙‍♂️
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    Because they are non-current assets, you deduct it from the normal operating profit and instead add it to the investing activities, so that it is listed as investment instead.
  • meibaker
    meibaker Registered Posts: 481 Dedicated contributor 🦉
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    Rinske wrote: »
    Because they are non-current assets, you deduct it from the normal operating profit and instead add it to the investing activities, so that it is listed as investment instead.

    oh i see, thanks rinske!
  • meibaker
    meibaker Registered Posts: 481 Dedicated contributor 🦉
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    why we dont need to adjust cash and cash equivalent in operating activities?
  • Rinske
    Rinske Registered Posts: 2,453 Beyond epic contributor 🧙‍♂️
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    The statement of cash flow shows the movement in cash and cash equivalents over the year for operating, financing and investing activities. The actual amounts are listed at the bottom of the statement.

    If you would also add them to the operating activities part, you would basically count the movements twice.
  • jewels.p
    jewels.p Registered Posts: 1,774 Beyond epic contributor 🧙‍♂️
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    Another tip for Statements of Cash Flow for anybody doing them is before you do the Statement of Cash Flow put in the figures for Cash and Cash equivalents at begin of year and Cash and Cash equivalents at end of year this acts as a double check that all your figures are correct.

    I discovered this later on when learning these and it definitely helped.
  • A-Vic
    A-Vic Registered Posts: 6,970 Beyond epic contributor 🧙‍♂️
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    Clair Finches standards book was fantastic explanning this highly recomend it
  • meibaker
    meibaker Registered Posts: 481 Dedicated contributor 🦉
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    ohhh, think i understand that!
    i am really having problem with this cash flow! i want to cry.....

    in cash flows from investing activities
    why we deduct interest received and dividend recieved while add proceeds from sale ??
  • meibaker
    meibaker Registered Posts: 481 Dedicated contributor 🦉
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    A-Vic wrote: »
    Clair Finches standards book was fantastic explanning this highly recomend it

    what's the name of the book? where can i get it from?
    many thanks
  • meibaker
    meibaker Registered Posts: 481 Dedicated contributor 🦉
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    jewels.p wrote: »
    Another tip for Statements of Cash Flow for anybody doing them is before you do the Statement of Cash Flow put in the figures for Cash and Cash equivalents at begin of year and Cash and Cash equivalents at end of year this acts as a double check that all your figures are correct.

    I discovered this later on when learning these and it definitely helped.

    thanks jewels for your great tips! really appreciated!
  • taskey
    taskey Registered Posts: 1,800 Beyond epic contributor 🧙‍♂️
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