The International Accounting Standard (IAS) 7 is a set of accounting standards that outlines the requirements for the preparation of a cash flow statement. A cash flow statement is a financial statement that shows the inflows and outflows of cash and cash equivalents over a period of time. IAS 7 requires that a cash flow statement be prepared using the indirect method. The indirect method starts with net income and adds back non-cash expenses and subtracts non-cash gains to arrive at cash flow from operating activities.
IAS 7 also requires that a cash flow statement be presented in a way that is consistent with the other financial statements. This means that the cash flow statement should be prepared using the same accounting principles and methods as the other financial statements. IAS 7 is an important standard for companies that are required to prepare financial statements in accordance with International Financial Reporting Standards (IFRS). The IAS 7 cash flow statement template can be used by companies to help them prepare a cash flow statement that is compliant with IAS 7.
Cash Flow from Operating Activities
Cash flow from operating activities is the cash that is generated from the normal operations of a business. This includes cash from sales, less cash paid for expenses such as wages, rent, and utilities. Cash flow from operating activities is the most important section of the cash flow statement because it shows how much cash a business is generating from its operations. A positive cash flow from operating activities indicates that the business is generating enough cash to cover its expenses and invest in growth. A negative cash flow from operating activities indicates that the business is not generating enough cash to cover its expenses and is having to borrow money or sell assets to meet its obligations.
There are a number of factors that can affect cash flow from operating activities, including changes in sales volume, changes in the cost of goods sold, changes in operating expenses, and changes in working capital. A business can improve its cash flow from operating activities by increasing sales volume, reducing the cost of goods sold, reducing operating expenses, and managing working capital effectively.
Cash Flow from Investing Activities
Cash flow from investing activities is the cash that is used to purchase or sell long-term assets, such as property, plant, and equipment. This also includes cash from the sale of investments, such as stocks and bonds. Cash flow from investing activities is important because it shows how a business is investing in its future. A positive cash flow from investing activities indicates that the business is investing in growth. A negative cash flow from investing activities indicates that the business is selling assets or reducing its investments.
There are a number of factors that can affect cash flow from investing activities, including changes in capital expenditures, changes in the sale of assets, and changes in the purchase of investments. A business can improve its cash flow from investing activities by reducing capital expenditures, increasing the sale of assets, and reducing the purchase of investments.
Cash Flow from Financing Activities
Cash flow from financing activities is the cash that is used to raise or repay debt and equity financing. This includes cash from the issuance of stocks and bonds, cash from the repayment of debt, and cash from the payment of dividends. Cash flow from financing activities is important because it shows how a business is financing its operations. A positive cash flow from financing activities indicates that the business is raising more money than it is repaying. A negative cash flow from financing activities indicates that the business is repaying more money than it is raising.
There are a number of factors that can affect cash flow from financing activities, including changes in debt levels, changes in equity levels, and changes in dividend payments. A business can improve its cash flow from financing activities by reducing debt levels, increasing equity levels, and reducing dividend payments.
Conclusion
The cash flow statement is an important financial statement that provides information about a company’s cash flows from operating, investing, and financing activities. IAS 7 is a set of accounting standards that outlines the requirements for the preparation of a cash flow statement. The IAS 7 cash flow statement template can be used by companies to help them prepare a cash flow statement that is compliant with IAS 7.
The cash flow statement can be used by investors, creditors, and other stakeholders to assess a company’s financial performance and to make informed decisions about the company.
