Reporting of Cash Flows from Operating Activities Assignment Help

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Cash inflow and outflow are the measures of determining a firm’s profit though its business. The investment done by various stakeholders and sponsors id termed as cash inflow and the expenses done either over production, processing, advertisement, marketing etc. is termed as cash outflow. This article concentrates on such cash flows derived from operating activities. Through our dynamic Reporting of Cash Flows from Operating Activities Assignment Help team, we aim at our clients to get an insight over this topic from professional point of view.

What is cash flow from operating activities?

Also termed in short as ‘CFO’ cash flow from operating activities, is method of indicating the monetary power brought by a firm from its current running business activities. These activities can be anything such as production or manufacturing of goods and items, providing services to client etc. cash flow from operating activities do not contain any long term investment cost. It is also known as net cash or operating cash flow and it can be calculated from the following formula.

 
• Operating cash flow = [EBIT + Depreciation] – Taxes +/- [Change in Working Capital]

 

• Our dynamic team for Reporting of Cash Flows from Operating Activities Assignment Help has classified two methods for preparing operating cash flow as follows.

 
1. Direct method: a summary of cash inflows and outflows are considered in this method. As this method requires more information, so this method is not mostly preferred by many of the firms. Cash receipts from sales are taken and interest rates and dividends are added after deducting the cash payments for operational expenses, income taxes etc. after that the cash collection or the actual cash received from the customers during accounting period are calculated from the following formula.

 
• Cash collection receipt from sales = no. of sales + (rise or fall in accounts receivable)

 
2. Indirect method: in this method, the amount of net cash flow from operating activities can be calculated by using net income figure from the income statement. To prepare income statement accrual basis is used where revenue is considered when it is earned and is not considered when it is received. It also defines that the net income is not a variable for representing the net cash flow from operating activities. And hence it becomes urgent to comply EBIT (Earnings before Interests and Taxes) for such items that affect net income even if no real cash is paid or received against it. From Reporting of Cash Flows from Operating Activities Assignment Help student can learn formulas for finding it and apply it to solve numerous case studies and problems. The indirect method follows the following formula for calculating cash flow from operating activities:

 
• Net cash flow from operating activities = Net Income + Non cash expenses + non operating losses – non operating gains + decrease in current assets – increase in current assets + increase in current liabilities – decrease in current liabilities.

 
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