Statement of Cash Flows 1

STATEMENT OF CASH FLOWS

• OPERATING ACTIVITIESDirect

Cash receipts from customers - Cash paid to suppliers & employees

= Cash from operationsor Indirect

Net profit before tax (I/S)+/- non cash items+/- changes in working capital=Cash from operations

• FINANCING ACTIVITIES• INVESTING ACTIVITIES

Statement of Cash Flows 2

SASOL – 2010A direct statement of cash flow

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TRUWORTHS – 2010An indirect statement of cash

flows

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CASH FLOW versus PROFIT

• John Carolin (unpublished M.Com thesis – The informational content of cash flow numbers versus accrual- based income numbers)

• Research generally supports the “conventional wisdom that accrual based earnings are superior to operating cash flows”

• In South Africa “EPS dominates CFO in explaining the variation of cumulative abnormal returns (1988 – 2002). CFO does have statistically significant incremental information”

NZF 2009 ????

Statement of Cash Flows 12