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How to Prepare a Cash Flow Statement Format?

Updated on October 17, 2020 , 86 views

Putting it in a layman’s words, a cash flow statement summarizes the inflow and outflow of cash in a company. Thus, for investors and stakeholders, it is an essential way to comprehend how the company is acquiring its funds and how is it spending it on varied operations.

Used in combination with an income statement and Balance Sheet, a cash flow statement breaks down the cash flow in different categories; thus, it has its own specific format. Scroll down and let’s find out the cash flow statement format in this post.

Cash flow statement format

Categories of a Cash Flow Statement

Before you can understand how to prepare a cash flow statement step by step, you must know that there are three primary components of this statement, such as:

  • Cash from operative activities
  • Cash from investment
  • Cash from financing

What you need to know, however, is that CFS is entirely different from a balance sheet and the income statement as it doesn’t comprise the amount of future outgoing and incoming cash recorded on credit. Hence, in this statement, cash will not be similar to net income; unlike a balance sheet and income statement.

Format of Cash Flow Statement

Operating Activities

Cash flow from such activities can be derived under two different phases:

  • By assessing the operating gain before altering working capital: (Cash flow direct method format)
Total Profit Before Deducting Tax and Other Items Amount Amount
Depreciation (Add) xxx
Repayment of intangible assets (Add) xxx
Loss on fixed assets’ sale (Add) xxx
Loss on long-term investments’ sale (Add) xxx
Tax provision (Add) xxx
Dividend paid (Add) xxx xxx
Profit on fixed assets’ sale (Less) xx
Profit on long-term investments’ sale (Less) xxx xxx
Operating profit before making changes in the working capital xxx
  • The impact of alterations in working capital

In term of this phase, the following changes should be kept in mind:

  • Current Assets:
    • An increase of a current asset leads to a decrease in the inflow of cash
    • A decrease in a current asset leads to an increase in the inflow of cash
    • Current Liabilities:
    • An increase in a current liability decreases outflow of cash
    • A decrease in a current liability increases the outflow of cash

Thus, cash from operational activities = operating gain before making any changes in working capital + total decrease in current assets + total increase in current liabilities – total increase in current assets – total decrease in current liabilities

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Investment Activities

After cash flow statement operative activities comes the ones related to investment. The cash flow from these activities can be derived by adding cash inflows from assets maturity or sale and subtracting the outflows from payment or purchase of new investments or fixed assets. Generally, the cash flow that comes from Investing activities could be of different types, such as:

  • Cash payments to get fixed assets
  • Cash payments to get Debenture or shares investment
  • Cash receipts taken from the disposal of any fixed asset
  • Cash receipts taken from the repayment of loans or advances to any third party

Cash Inflow from Investment Examples

  • Cash sale of goodwill, furniture, building and land, machinery and plant, etc.
  • Cash sale of investments that were made in debentures or shares in any other company
  • Cash receipts taken from acquiring the principal amount of loan made to anybody else

Cash Outflow from Investment Examples

  • Fixed assets purchase, such as machinery, furniture, building, land, etc.
  • Intangible assets purchase, such as trademark, goodwill, etc.
  • Purchase of debentures and shares
  • Purchase of Bonds by the government
  • Loan disbursed to the third party

Financing Activities

Cash flows arising from these activities are the cash that has been received or paid from activities that are either long-term liabilities or non-current ones. It may also include the capital of shareholders. Thus, a cash flow that comes from these activities are:

  • Cash earned from shares or other same instruments
  • Cash earned from debentures, notes, loans, bonds, and other short-term borrowings
  • Cash repayment of the borrowed amount

Cash Inflow from Financing Examples

  • Cash from equity issue and preference share capital
  • Cash from a long-term note, bonds, and debentures

Cash Outflow from Financing Examples

  • Shareholders’ payments of dividends
  • Repayment or redemption of loans
  • Redemption of share capital
  • Buyback equity shares

Here is a simple way answering how to prepare a cash flow statement in excel using the indirect method:

Indirect Method Amount Amount
Net profit before counting tax and extra items xxx
Cash flow from operative activities
Depreciation (Add) xxx
Repayment of intangible assets (Add) xxx
Loss on fixed assets’ sale (Add) xxx
Loss on long-term investments sale (Add) xxx
Tax provision (Add) xxx
Dividend paid (Add) xxx xxx
Profit on fixed assets’ sale (Less) xxx
Profit on long-term investments sale (Less) xxx xxx
Operating profit before making any changes into the working capital (Less) xxx
Current liabilities increase (Add) xxx
Current assets decrease xxx xxx
Current assets increase (Less) xxx
Current liabilities decrease xxx xxx
Working capital decrease / net increase (B) xxx
Cash generated from operative activities (C) = (A+B) xxx
income tax paid (D) (Less) xxx
Cash flow from before additional items (C-D) = (E) xxx
Adjusted additional items (+/) (F) xxx
Total cash flow from operative activities (E+F) = G xxx
Cash flow from investment activities
Fixed assets’ sale proceeds xxx
Investment sale proceeds xxx
Purchase of fixed assets/debentures/shares xxx
Total cash from investment activities (H) xxx
Cash flow from financial activities

Conclusion

Once you have understood the nitty-gritty of a cash flow statement format, it becomes easier to come up with one. However, if you are still confused, you can always seek help from a professional to get done with this task.

Disclaimer:
All efforts have been made to ensure the information provided here is accurate. However, no guarantees are made regarding correctness of data. Please verify with scheme information document before making any investment.
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