Principles of Accounting: Cash Flow Statement, Trend Analysis, and Evaluation

Running head: PRINCIPLES OF ACCOUNTING 0
Principles of Accounting

PRINCIPLES OF ACCOUNTING 1
Contents
Introduction...........................................................................................................................................2
Statement of the cash flows...............................................................................................................2
Cash flows from operating activities.................................................................................................2
Cash flow from investing activities...................................................................................................2
Cash flow from financing activities...................................................................................................3
Statement of cash flow statement..........................................................................................................3
Konski Manufacturing.......................................................................................................................3
Reconciliation of Profit.....................................................................................................................5
Statement of Cash flow Statement.........................................................................................................5
KIM Limited......................................................................................................................................5
Reconciliation of Profit.....................................................................................................................7
Trend Analysis......................................................................................................................................9
Calculation of ratios............................................................................................................................10
Evaluation............................................................................................................................................12
Other resources....................................................................................................................................13
Bottom-Up Approach to Fundamental analysis...........................................................................13
Industry analysis..........................................................................................................................13
Market analysis............................................................................................................................13
References...........................................................................................................................................14

PRINCIPLES OF ACCOUNTING 2
Introduction
Statement of the cash flows
In financial accounting a cash flow is also known as the statement of cash flows
which depicts the accounts of the balance sheet with respect to change and the income is
affecting the cash and the cash equivalents. The description is broken down to operating,
investing and the financing activities (Gitman, Juchau, & Flanagan, 2015).
The cash flow statement is prepared mainly for the purpose of the recording of the
inflow and the outflow of the case. The disclosure of the operating results and the changes
which are accompanied in the balance sheet are disclosed in the cash flow statement
(Nurnberg, 2015). The cash flow statement reflects the liquidity of the firm, the firms
working on the same level can be compared and improved accordingly and lastly also helps
in improving the performance and operational activities by eliminating the effects that aroise
due to the utilisation of the different methods (Wen, et al 2018).
Cash flows from operating activities
The first section determines the net cash inflow and the activities that are directly
attributable to the operating activities. The main business activities are included such as
buying, selling, providing services (Cable, Healy & Sun, 2018). It includes the amount spent
on the business directly such as cash paid to suppliers, cash received form the customers. The
extra ordinary items are deleted and the net amount is treated as the cash flow from the
operating activities.
Cash flow from investing activities
It determines the company’s aggregate change in a company’s cash position resulting
from amounts spent on the investments. The gains or losses through and the changes results

PRINCIPLES OF ACCOUNTING 3
in investment gains or losses (Lewellen & Lewellen, 2016). It is separately reported because
it provides the information of the fact as to whether the company is investing in the profit
based resources or whether it is disposing of the resources already.
Cash flow from financing activities
The cash flow from financing activities is the last item in the format of the cash flow
statements. This activity reports the issuance and repurchases of the company’s own bonds
and stock ant the payment of the dividends. The repayment of the borrowings and the interest
payable is also recorded (Qian & Yeung, 2015).
Statement of cash flow statement
Konski Manufacturing
Statement of cash flow of Konski Manufacturing
Cash flow from operating activities
Cash reciepts from customers 6418000
Cash payment to suppliers 4013000
Operating expenses paid 893000
Tax paid 353000
5259000
Net cash from operating activities 1159000
Cash flow from investing activities
Purchase of machinery
-
1370000
Proceeds from sale of machinery 723000
Net cash from investing activities -647000
Cash flow from financing activities
Acquisition of loan -200000
Proceeds from the retained earnings 230000
Net cash from financing activities 30000