This chapter covers the Cash Flow Statement, a key financial document that reflects the movement of cash in a business over a specific period. Understanding this statement is crucial for assessing the liquidity and financial health of a company.
Cash Flow Statement – Formula & Equation Sheet
Essential formulas and equations from Accountancy Part - II, tailored for Class 12 in Accountancy.
This one-pager compiles key formulas and equations from the Cash Flow Statement chapter of Accountancy Part - II. Ideal for exam prep, quick reference, and solving time-bound numerical problems accurately.
Key concepts & formulas
Essential formulas, key terms, and important concepts for quick reference and revision.
Formulas
Cash Flow from Operating Activities (Indirect Method): Net Profit + Depreciation + (Decrease in Current Liabilities) - (Increase in Current Assets)
This formula derives the cash flow from operating activities using net profit as a starting point, adding back non-cash charges and adjusting for working capital changes.
Cash Flow from Investing Activities: Cash Inflows - Cash Outflows
This formula calculates net cash flow from investing activities by subtracting cash outflows related to investments from cash inflows received from asset sales.
Cash Flow from Financing Activities: Cash Proceeds from Financing - Cash Repayments
This measures net cash flow from financing activities by subtracting cash outflow related to repayments of borrowings and dividends from cash inflows received from issuing equity or debt.
Net Increase in Cash: Cash Flow from Operating Activities + Cash Flow from Investing Activities + Cash Flow from Financing Activities
This sums the cash flows from all three activities to calculate the net increase or decrease in cash for the period.
Cash and Cash Equivalents at End = Cash and Cash Equivalents at Beginning + Net Increase in Cash
This indicates the final cash position by adding the net increase in cash to the opening cash balance.
Operating Cash Flow Ratio = Cash Flow from Operating Activities / Current Liabilities
This ratio assesses the ability of a company to cover its current liabilities with cash generated from operating activities.
Free Cash Flow = Cash Flow from Operating Activities - Capital Expenditures
This gauges the cash available for distribution to securities holders after capital expenditures necessary to maintain or expand the asset base.
Dividends Paid = Prior Year's Proposed Dividend + Current Year's Declared Dividend
This formula calculates total dividends paid during the year by combining proposed dividends from the previous year with declared dividends from the current year.
Cash Received from Customers = Revenue + Decrease in Accounts Receivable
This measures cash inflows from customers based on revenue recognized and adjustments for any changes in accounts receivable.
Cash Paid to Suppliers = Cost of Goods Sold + Increase in Inventory + Increase in Accounts Payable
This determines the total cash outlay for purchases during the period by adjusting cost of goods sold for inventory changes and accounts payable.
Equations
Net Profit = Revenue - Expenses
This identifies net profit as the difference between total revenue and total expenses, fundamental to financial analysis.
Cash Flow = Cash Inflows - Cash Outflows
This basic equation defines cash flow as the net result of cash received versus cash paid out during a given period.
Total Assets = Total Liabilities + Equity
This fundamental accounting equation illustrates the balance sheet principle, showing that a company's resources are financed by debts and shareholders' equity.
Working Capital = Current Assets - Current Liabilities
Working capital indicates the liquidity position of a business, determining its ability to meet short-term obligations.
Gross Profit = Revenue - Cost of Goods Sold
This formula assesses the profitability of core activities by subtracting the direct costs associated with producing goods or services sold.
Net Cash Flow = Cash Flow from Operating + Cash Flow from Investing + Cash Flow from Financing
This encapsulates the overall cash movement from all activities categorized in the cash flow statement.
Current Ratio = Current Assets / Current Liabilities
This liquidity ratio measures a company's ability to pay short-term obligations, indicating financial health.
Return on Investment (ROI) = (Net Profit / Cost of Investment) x 100
ROI quantifies the efficiency of an investment, expressed as a percentage of the net profit relative to the investment cost.
Earnings per Share (EPS) = Net Income / Average Outstanding Shares
This metric measures profitability on a per-share basis, reflecting the success of a company in generating profit from its equity.
Debt to Equity Ratio = Total Liabilities / Total Shareholder Equity
This ratio compares a company's total liabilities to its shareholder equity, instrumental in assessing financial leverage.
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Start chapterThis chapter covers the financial statements of a company, including their types, purposes, and importance for users.
Start chapterThis chapter focuses on the analysis of financial statements, crucial for understanding a company's financial health. It equips students with the skills to interpret key financial data for informed decision-making.
Start chapterThis chapter explores accounting ratios, crucial for analyzing financial statements. Understanding these ratios helps assess a company's performance, solvency, and efficiency, aiding decision-making.
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