Liquidating value of preferred stock
Cash inflows from these sources includes: e) Taxation: These cash flows will be those to and from the tax authorities in relation to the company's revenue and capital profits, i.e. f) Investing activities: the acquisition and disposal of long term assets and other investments not included in cash equivalents.Cash receipts include: i) receipts from sales or disposals of fixed assets (or current asset investments) ii) receipts from sales of investments in subsidiary undertakings net of any cash or cash equivalents transferred as part of the sale iii) receipts from sales of investments in other entities iv) receipts from repayment or sales of loans made to other entities.i) payments to acquire fixed assets ii) payments to acquire investments in subsidiary net of balances of cash and cash equivalents acquired iii) payments to acquire investments in other entities iv) loans made and payments to acquire debt of other entities.
Funds may be broadly categorised into operating (or working) capital (difference between current assets and current liabilities), and ownership (or investment) capital.Some businesses or industries will continue to find fund flow statements useful and informative.For this reason, it is necessary to examine funds flow statements.Survival of a business depends not only on profits but perhaps more on its ability to pay its debts when they fall due.Such payments might include 'profit and loss' items such as material purchases, wages, interest and taxation etc, but also capital payments for new fixed assets and the repayment of loan capital when this falls due (e.g. This chapter is intended to provide an explanation of: "Cash flow" is one of the most vital elements in the survival of a business.The reconciliation between the operating profit reported in the profit and loss account and the net cash flow from operating activities must show the movements in stocks, debtors and creditors related to operating activities.
d) Returns on investments and servicing of finance.
It can be argued that 'profit' does not always give a useful or meaningful picture of a company's operations.
Readers of a company's financial statements might even be misled by a reported profit figure.
Indirect method cash flow statement Figure 3.1 shows a pro forma cash flow statement.
Figure 3.1 Pro forma cash flow statement a) Cash in hand and deposits repayable on demand with any bank or financial institution.
Funds are not only generated internally; they may be externally generated, and so the chapter finishes with a discussion of externally generated funds.