Improve your financial planning with our Cash Flow Statement Indirect Method Template - a comprehensive tool for accurate cash flow tracking.
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Gather all relevant financial documents
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Identify the net income from the income statement
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Identify non-cash expenses
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Determine changes in working capital
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Calculate depreciation expense
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Calculate the change in accounts receivable
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Calculate the change in inventory
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Calculate change in accounts payable
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Identify all investing activities
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Identify all financing activities
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Calculate net cash provided by operating activities
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Calculate net cash used in investing activities
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Calculate net cash provided by financing activities
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Compute the change in cash balance between the beginning and end of the period
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Review the cash flow statement for accuracy
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Approval: Financial Analyst
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Finalize the cash flow statement
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Store the finalized cash flow statement in a secure location
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Distribute the cash flow statement to relevant stakeholders
Gather all relevant financial documents
Start by collecting all the necessary financial documents needed for preparing the cash flow statement. These may include income statements, balance sheets, and cash flow statements from previous periods. The documents will provide the necessary data for the subsequent tasks.
Identify the net income from the income statement
Locate the net income figure from the income statement. This represents the total profit or loss generated by the business during the period. The net income is a crucial component in calculating the cash flow from operating activities.
Identify non-cash expenses
Identify any non-cash expenses that are included in the income statement. Non-cash expenses do not involve an actual outflow of cash, but are still included in the income statement. Examples of non-cash expenses include depreciation and amortization expenses. Be sure to exclude any cash expenses from this analysis.
Determine changes in working capital
Analyze the changes in working capital from the balance sheet. Working capital refers to the difference between current assets and current liabilities. Calculate the change in working capital by comparing the figures from the beginning and end of the accounting period. This information will be used to calculate the cash flow from operating activities.
Calculate depreciation expense
Calculate the depreciation expense by looking at the financial statements. Depreciation is the allocation of the cost of an asset over its useful life. It is a non-cash expense that needs to be added back to the net income to determine cash flow from operating activities.
Calculate the change in accounts receivable
Analyze the change in accounts receivable from the balance sheet. Accounts receivable represents the amount of money owed to the business by its customers. Calculate the difference between the accounts receivable at the beginning and end of the accounting period. This information will affect the cash flow from operating activities.
Calculate the change in inventory
Examine the change in inventory from the balance sheet. Inventory refers to the goods and materials held by the business for sale. Calculate the difference between the inventory at the beginning and end of the accounting period. This information will impact the cash flow from operating activities.
Calculate change in accounts payable
Calculate the change in accounts payable from the balance sheet. Accounts payable represents the amount of money owed by the business to its suppliers and creditors. Determine the difference between the accounts payable at the beginning and end of the accounting period. This information will influence the cash flow from operating activities.
Identify all investing activities
Identify all the investing activities undertaken by the business during the accounting period. Investing activities involve the acquisition or sale of long-term assets, such as property, plant, and equipment. List down all the relevant investing activities conducted by the business.
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1. Purchased new equipment
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2. Sold existing assets
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3. Acquired shares in another company
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4. Liquidated an investment
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5. Bought a property
Identify all financing activities
Identify all the financing activities carried out by the business during the accounting period. Financing activities involve the raising or repayment of funds to finance the business operations. List down all the relevant financing activities undertaken by the business.
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1. Issued bonds
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2. Paid dividends to shareholders
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3. Obtained a loan
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4. Repaid a loan
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5. Issued new shares
Calculate net cash provided by operating activities
Calculate the net cash provided by operating activities by combining the net income, non-cash expenses, changes in working capital, depreciation expense, and other adjustments. This figure represents the cash generated or used by the core operations of the business.
Calculate net cash used in investing activities
Calculate the net cash used in investing activities by summing up the cash inflows and outflows from all the investing activities identified earlier. This figure indicates the net cash outflow or inflow resulting from the business's investing decisions.
Calculate net cash provided by financing activities
Calculate the net cash provided by financing activities by aggregating the cash inflows and outflows from all the financing activities identified earlier. This figure reflects the net cash inflow or outflow resulting from the business's financing decisions.
Compute the change in cash balance between the beginning and end of the period
Compute the change in the cash balance by subtracting the cash balance at the beginning of the accounting period from the cash balance at the end of the period. This figure represents the overall change in the cash position of the business.
Review the cash flow statement for accuracy
Thoroughly review the completed cash flow statement to ensure accuracy and correctness. Check for any errors, inconsistencies, or missing information that may affect the integrity of the statement. Make necessary corrections or adjustments as needed.
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1. Check net income calculation
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2. Verify all adjustments
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3. Cross-reference with financial documents
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4. Ensure proper formatting
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5. Verify totals and subtotals
Approval: Financial Analyst
Will be submitted for approval:
Calculate net cash provided by operating activities
Will be submitted
Calculate net cash used in investing activities
Will be submitted
Calculate net cash provided by financing activities
Will be submitted
Finalize the cash flow statement
Make final adjustments and modifications to the cash flow statement based on the review process. Ensure that all calculations and figures are accurate and properly aligned. The finalized cash flow statement is ready for storage and distribution.
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1. Reclassify certain items
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2. Include additional notes
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3. Add supplemental information
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4. Adjust formatting
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5. Align headings and subheadings
Store the finalized cash flow statement in a secure location
Store the finalized cash flow statement in a secure location to ensure its availability and protect its confidentiality. Choose a secure storage system or platform that allows for easy access by authorized individuals and protects against unauthorized access or tampering.
Distribute the cash flow statement to relevant stakeholders
Distribute the finalized cash flow statement to relevant stakeholders, such as management, investors, and regulatory bodies. Ensure timely and accurate distribution to keep stakeholders informed about the financial performance and cash flow position of the business.
