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I saw the lecture but i still have some questions related to it.
1) In cashflows from operating activities:
we are trying to identify the cash profit from the operating activities which means SOPL.2) How do we identify the non-cash items to be adjusted in operating activities?
3) Do we need to adjust non-cash items in operating activities only (ie not for investing or financing activities)?
4) How do we know which non-cash item to add or less in operating activities?
5) In cashflows from investing activities:
We are trying to identify the cash profit from investment activities such as buying & selling of PPE, buying shares and borrowing loans.6) In cashflows from financing activities:
We are trying to figure out the cash profit from finance activities to raise the money for business by issuing shares, borrowing loans and repayment of loans.Is that all true?
1. The profit in the SOPL is not cash. That is why we adjust the SOPL profit for deprecation and for changes in current assets and liabilities.
2. It is what I explain the lectures and using the information in the question.
3. Yes – only operating activities. For the others we know the cash received or pain.
4 See 2
5 No we are not looking for profit. We are listing the cash received or paid.
6 Again no. We are not looking at profit. We are listing the cash received or paid.
I appreciate your time but what do you say about these…
1) Is it true that the reason profit in the SOPL is not a cash is because we use the accrual accounting where revenue and expenses are recorded when they happened (earned) irrespective when the cash will be received or paid?
2) I understood that we have to look for information in the question to identify the cash or non-cash items but how do we identify it in real-life (unless we memorize it)?
3) If the item is non-cash items then whatever we added as income should be deducted AND whatever we deducted as expenses should be added back to remove non-cash items from SOCF.
4) You start SOCF with PBT but can we use PBIT or net profit instead?
5) In Investing activities we are looking for the cash received or paid from investments such as Buying & selling of PPE, Equity and NCL.
6) In Financing activities we are looking for the cash received or paid from finances such as Equity and NCL.
Sorry for so questions. Thanks by the way!
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