Accounting Business Reporting for Decision Making

CHAPTER 7 Statement of cash flows 301

Indirect method Method of preparing a statement of cash flows that adjusts profit or loss for the

effects of transactions of a non-cash nature and deferrals or accruals of operating revenue and

expenses. (The indirect method is the reconciliation of the profit/loss with the cash flows from

operating activities discussed earlier.)

Investing activities Those activities that relate to the acquisition and/or disposal of non-current assets

(e.g. property, plant and equipment, and other productive assets and investments) not falling within

the definition of cash.

Liquidity The ability of an entity to meet its short-term financial commitments (obligations that are

expected to become due within the next year or operating cycle).

Operating activities Relate to the provision of goods and services and other activities that are neither

investing nor financing activities.

Ratio analysis An examination of the relationship between two quantitative amounts with the

objective of expressing the relationship in ratio or percentage form.

Statement of cash flows Statement that reports on an entity’s cash inflows and cash outflows for a

specified period.

Trend analysis Method of examining changes, movements and patterns in data over a number of time

periods.

Working capital Difference between current assets and current liabilities.

APPLY YOUR KNOWLEDGE 20 marks

The consolidated statement of cash flows for CSR Ltd for the year ended 31 March 2015 is presented

below.

CSR Ltd

Statement of cash flows for the year ended 31 March 2015

Consolidated

($ millions) Note 2015 2014

Cash flows from operating activities

Receipts from customers

Payments to suppliers and employees

Dividends and distributions received

Interest received

Income tax (paid) received

2 176.2

(1 955.5

9.7

3.0

(2.5

)

)

1 894.8

(1 796.7

10.5

3.0

0.5

)

Net cash from operating activities 230.9 112.1

Cash flows from investing activities

Purchase of property, plant and equipment and other

non-current assets

Proceeds from sale of property, plant and equipment and

other non-current assets

Costs associated with acquisition and disposal of businesses

Purchase of controlled entities and businesses, net of

cash acquired

Loans and receivables advanced

(93.6

93.5

(6.7

(38.1

(0.5

)

)

)

)

(102.0

53.1

(1.5

(10.1

(3.5

)

)

)

)

Net cash (used in) from investing activities (45.4) (64.0)

Cash flows from financing activities

Net repayment of borrowings

Dividends paid

Interest and other finance costs paid

(34.4

(82.4

(6.6

)

)

)

(2.6

(45.0

(7.2

)

)

)

Net cash used in financing activities (123.4) (54.8)

(continued)