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Is it true that:
1. In operating cashflows: we only include the cash items to get the cash profit from income statement items which is different from the net profit amount?
2. All the items like depreciation, amortization, profit or loss on sale are not cash items and therefore we must not include them in our statement of cash flow?
3. In investing cashflows: we include all the cash coming and going from investment of the company such as investments in assets, shares and lending?
4. In financing cashflows: we include all the cash coming and going from financing sources such as issuance of shares, long-term borrowing and repayment of capital?
Could you help me understanding the three main headings and what items is considered in each heading?
What you have written is all correct.
Have you not watched my free lectures on this, because I do explain exactly what comes under each heading?
Can you please also explain how do we deal with tax and interest expenses when preparing statement of cash flow?
And should we start the statement with net profit or profit before interest and tax and how does interest and tax should be dealt in either case?
Have a good one!
Can you please also explain how do we deal with tax and interest expenses when preparing statement of cash flow?
And should we start the statement with net profit or profit before interest and tax and how does interest and tax should be dealt in either case?
What I understood is that since the company has paid tax and interest during the year which means we need to deduct the cash payments?
Secondly, I have a confusion with the starting because do we need to start the cash flow with profit before tax and interest or net income. Do we deduct the interest and tax paid during the year no matter whether we start the statement with Net income or Profit before interest and tax?
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