- What Is the Meaning and Objectives of Cash Flow Statements?
- Partnership Financial Statements Vs. Corporate Financial Statements
- Comparative Balance Sheet Analysis
- Difference Between Income Statement vs. Balance Sheet vs. Cash Flow
- Adjustments to Reconcile Net Income to Net Cash
- Disclosure of Non-Cash Activities
The statement of cash flows presents cash income and expenses from operations, financing activities and investing activities. A cash-flow statement provides more specific insight than the income statement, which includes non-cash income and expenses, by revealing a company's ability to meet its immediate and short-term financial obligations. A number of items go into the calculation of cash flows from investing activities, but the calculation is fairly simple. The real challenge is gathering up all of the various financial information required to perform the calculation.
Add all cash-based investment gains for the period. This does not include things like capital gains and interest accruals, but does include final bond principal repayments and securities sold for cash. When analyzing investment income, ask yourself whether or not you received cash for each item to determine whether it belongs on this financial statement.
Calculate your total dividend income for the statement period if it is taken in cash. Again, do not include dividend income, which is reinvested in additional stocks or other securities, only dividend checks which are deposited into cash accounts.
Total the capital expenditures for the period. Any large expenses for facilities and equipment can be considered a long-term investment, since the purpose for buying such valuable assets is almost always to increase revenue or profitability in the future. Examples of capital expenditure investments include vehicles, machinery and buildings.
Record your total cash income from the sale of capital assets. Almost any asset other than inventory can be sold to maximize a company's total cash income. Companies can sell fully owned buildings before moving their office to a new location, for example, or may sell used computer equipment for cash after a technology upgrade.
Add up all cash income and subtract all cash expenses to arrive at your cash flow from investing activities for the period. Add this figure to your totals in the operations and financing activities section to arrive at your net cash gain or loss for the period.
Separate the cash outlays for expensive investments from amounts deferred via credit or a loan. If you put a cash down payment on a new business vehicle, for example, include only the amount of the down payment in the cash-flows statement. List the remaining balance in the liabilities section of the balance sheet.
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