Definition of Cash Flow Statement
A cash flow statement is defined as a financial report which highlights the entire currency transactions. It also helps the business take economic decisions because it also highlights the company’s income and expenditure, which is needed to be dealt with.
Methods deployed for cash flow
Various methods are deployed for a proper cash flow. The most common methods which are used here are:
- Direct Method
This is one of the standard methods which are used in cash flow. In this method, there is a provisional usage of cash flow slips and cash payment bills. The difference between cash flow and cash payments is known as the net cash flow. The net cash flow determines the economic development of the company.
- Indirect Method
This is another method that is deployed for a proper cash flow. It can be achieved by considering the entire income before any tax implementation. It also makes the necessary adjustments. There are various arrangements which are made. The accounts which are done here are changes in stoke. It also operates on receivable, payable and non-payable cash transactions. The non-cash transactions include things like depreciation and provision of all items, which could affect the money.
Activities in cash flow:
Various cash flow activities are used. The most common cash flow activities which are used are
- Operation Activities
These are the activities that are mainly dependent on the working of the cash flow. The personnel who are deployed here deal with the incoming and outgoing transactions. It also deals with the analysis of the cash flow and evaluates its consequences.
- Financial Activity
These are the activities taken by the organization, which is strictly related to the company’s financial structure. The people deal with the money inflow and outflow of money. These activities also deal with the reparation of the annual balance statement.
- Investing Activity
This is the activity which is of vital importance. The primary things in which these activities are dealt with are the shareholder analysis. It also deals with the investments which various companies deploy for a particular business. It must always be kept in mind that the formal statement of the assets by different companies must be taken. Otherwise, it could result in severe consequences. In other words, the cash flow is highly dependent on investments.