Operating activities .

Operating activities include the production, sales and delivery of the company's product as well as collecting payment from its customers. This could include purchasing raw materials, building inventory, advertising, and shipping the product. Under IAS 7, operating cash flows include:[11] Receipts from the sale of goods or services Receipts for the sale of loans, debt or equity instruments in a trading portfolio Interest received on loans Payments to suppliers for goods and services. Payments to employees or on behalf of employees Interest payments (alternatively, this can be reported under financing activities in IAS 7, and US GAAP) buying Merchandise

Items which are added back to [or subtracted from, as appropriate] the net income figure (which is found on the Income Statement) to arrive at cash flows from operations generally include: Depreciation (loss of tangible asset value over time) Deferred tax Amortization (loss of intangible asset value over time) Any gains or losses associated with the sale of a non-current asset, because associated cash flows do not belong in the operating section.(unrealized gains/losses are also added back from the income statement) Dividends received Revenue received from certain investing activities

Investing activities Examples of Investing activities are Purchase or Sale of an asset (assets can be land, building, equipment, marketable securities, etc.) Loans made to suppliers or received from customers Payments related to mergers and acquisition.

Financing activities Financing activities include the inflow of cash from investors such as banks and shareholders, as well as the outflow of cash to shareholders as dividends as the company generates income. Other activities which impact the long-term liabilities and equity of the company are also listed in the financing activities section of the cash flow statement. Proceeds from issuing short-term or long-term debt Payments of dividends Payments for repurchase of company shares Repayment of debt principal, including capital leases For non-profit organizations, receipts of donor-restricted cash that is limited to long-term purposes

Items under the financing activities section include: Dividends paid Sale or repurchase of the company's stock Net borrowings Payment of dividend tax

Q. What cash flows from operating, investing and financing activities occur in a business? Explain by preparing a model cash flow statement?

Cash flows from operating activities: Operating activities includes cash effects of those transactions and events that enter into the determination of net profits or loss. Following are examples of cash flows from operating activities: - cash receipts from the sale of goods and the rendering of services. - cash receipts from royalties, fees, commissions, and other revenues - cash payments to suppliers for goods and services - cash payments to and on behalf of employees - cash receipts and payments of an insurance enterprise for premiums and claims, annuities and other policy benefits - cash payments or refunds of income tax unless they ca be specifically identified with financing and investing activities - cash receipt and payments relating to future contracts, forward contracts, option contracts, and swap contracts when the contracts are held for dealing or trading purposes etc.

Cash flows from Investing Activities: These includes the following: - cash payments to acquire fixed assets (including intangibles) These payments include those relating to capitalized research and development costs and self-constructed fixed assets. - cash receipts from disposal of fixed assets (including intangibles) - cash payments to acquire shares, warrants, or debit instruments of other

enterprises and interests in joint ventures. - cash receipts from disposal of shares, warrants, or debt instruments of other enterprises and interest in joint ventures. - cash advances and loans made to third parties - cash receipt from the repayment of advances and loans made to third parties. - cash receipts and payments relating to future contracts, forward contracts, option contracts and swap contracts except when the contracts are held for dealing or trading purposes.

Cash flows from Financing Activities: Financing activities are activities that result in changes in the size and composition of owners capital. - cash proceeds from issuing shares or other similar instruments. - cash proceeds from issuing debentures, loans, notes, bonds and other shortterm borrowings - payment of dividend.