Session 17 Statement of cash flows
　　Main Contents:
　　1.Need for a statement of cash flows
　　2.Format of cash flow statement
　　3.Cash generated from operations
　　4.Cash from financing activities
　　5.Cash from investing activities
　　17.1 The need for a Statement of cash flows
　　●Profit and liquidity:
　　Profit reported in the Income Statement is calculated using the accrual concept.
　　The profit for the year represents the increase in the net assets during the year, but it does not represent the increase in cash. It may be “tied up” in other assets, e.g.
　　- NCA may have been purchased.
　　- There may be an increase amount of receivables.
　　- There may be increased investment in inventory.
　　- The liabilities may have decreased.
　　Important to know:
　　- How much profit a business is making.
　　Equally important to know:
　　- How much cash is generating.
　　- How the cash is being used.
　　●The benefits of a Statement of cash flows:
　　It helps to:
　　- Provide additional information on business activities
　　- Assess the current liquidity of the business
　　- Allow the user to see the major types of cash flows and out of the business
　　- Estimate future cash flows
　　- Determine cash flows generated from trading transactions rather than other cash flows
　　●The drawbacks of a Statement of cash flows:
　　- Statement of cash flows is backward looking. Users of the accounts are particularly interested in the future.
　　- No interpretation of the Statement of cash flows is provided within the accounts. Users are required to draw their own conclusions as to the relevance of the figures contained within it.
　　- Non-cash transactions are not highlighted on the face of the Statement of cash flows. These are of interest to users as they will impact future cash flows.