List of cash flows from operating activity

In the previous episode we concluded the first part of the practical example on the cash flow list and in today's episode here we take the operational activity items (working capital items) and we will see with somehow we calculate the change in the assets and whether it is an internal or external cash flow, and it will mean in the example the list of financial position and of course a list Cash flows In the next episode, God willing, we will see a list of cash flows for investment and financing activities.

 

List of financial position 2012
 

	2012	2011
	EGP	EGP
Non-current assets
Fixed assets	150000000	182500000
Projects under implementation	9000000	6000000
Intangible assets	500000	450000
Total non-current assets	159500000	188950000
stock	25750000	18000000
Clients and receivable papers	27500000	14000000
Other debit balance	1050000	1250000
Cash in the Fund and banks	25100000	14000000
Total current assets	79400000	47250000
Current liabilities
Allocations	2750000	3500000
Bank of overdraft and debit current accounts	4750000	6500000
The rolling part of the long-term loan	15000000	20000000
Suppliers and payment papers	30000000	22000000
Creditors and other credit balances	1650000	1450000
Total current liabilities	54150000	53450000
Owner´s Equity
paid Capital	110000000	110000000
Legal reserve	14350000	10000000
Year profit	33650000	20480000
Total Owner´s equity	158000000	140480000
Non-current liabilities
Long-term loan	25000000	40000000
Deferred income tax	1750000	2270000
Total non-current liabilities	26750000	42270000

Statement of independent cash flows for the year ended 2012
 

	clarification	2012	2011
		EGP	EGP
Net Profit Year Before Income Taxes Net Profit Before Income Taxes general		36150000	31050000
Adjustments to reconcile the net profit with the cash flow
Resulting from operating activities
Depreciation of fixed assets		10500000	87500000
Depreciation of intangible assets		50000	50000
Financing expenses		1750000	1450000
Decline in assets		2750000	2500000
Allocations		1250000	850000
Currencies evaluation differences		(150000)	(130000)
		52300000	44520000
Change in stock المخزن Change in inventory الجرد		(7750000)	(1300000)
Change in clients and notes receivable		(13500000)	(15000000)
Change in other debit balances		200000	(750000)
Change in suppliers' balances and payable notes		8000000	2500000
Change in creditors and other credit balances		200000	(750000)
User of allocation		(700000)	(350000)
Financial expenses		(1750000)	(950000)
Paid income taxes		(1250000)	(1400000)
Net cash flows (used in) operating activities		35750000	26520000
Cash flows from investing activities
Proceeds from sale of fixed assets		850000	350000
Payments to purchase fixed assets		(7500000)	(4500000)
Net cash flows (used in) investing activities		(6650000)	(4150000)
Cash flows from financing activities
Change in overdraft and short-term loans		(3000000)	(1850000)
Receipts (payments) of the long-term loan		(15000000)	(10000000)
Net cash flows resulting from financing activities		(18000000)	(11850000)
The net change in cash and cash equivalents during the year		11100000	10520000
Cash and cash equivalents - the beginning of the year		14000000	3480000
Cash and cash equivalents - end of the year		25100000	14000000

 

Clarification operating activity clauses in the cash flow statement

 

 

Inventory

 

In order to calculate the change in inventory and see whether it is an internal or external cash change, by comparing the stock balance in the current financial period with the previous period, and this will be through the balance sheet as shown in the example

We note that the stock balance at the end of the year (2012) is 25750000 and last year (2011) 18000000

 

This means that the stock balance increased, the company then has a part of the stock balance of the last year that has not been sold, and therefore this is considered an external cash flow, on the contrary, if the stock balance in the current period is less than the previous period. This means that it is an internal cash flow

 

In our example, an outflow of cash remains of 7,750,000 (25,750,000-18,000,000)).

 

  It is deducted under the items of operating activities as shown in the list

There is an important point, which is that the stock balance, which appears in the balance sheet, is the stock balance after deducting the decrease in the value of the stock, if any. Therefore, when preparing the cash flow list, we take the total stock balance to an existing in the audit balance, meaning before the decrease in the inventory value.

 

Customers and notes receivable

In general, in the case of an increase in customer balances in the current period from the previous period, this means that there are sales during the period whose value has not been paid, in addition to sales from the previous period that have not been paid, and therefore the increase must be deducted from the net profit when making cash flows, meaning that it is considered a cash flow External is deducted within the items of cash flows from operating activities, and vice versa if the customers ’balance during the period is less than the customer’s balance in the previous period. This means that there is an internal cash flow that is added to the operating cash flow items.

 

If we go to the financial center list as shown:

 

Customer balance in 2012 is 27.5 million

 

 

Customer balance in 2011 is 14,000,000

 

This means that it has an external cash flow of (13,500,000) to be deducted from the items of operating cash flows

 

Other debit balances

In principle, this means amounts paid to persons or organizations, such as advance payments or advances, or in exchange for services that the second party did not supply for the company, examples of other debit balances such as, expenses paid in advance of letters of guarantee and insurances with others and due from related parties (amounts owed to your company At the related company ) Or revenues due to the company that will be explained in detail .Now, other debit balances are considered a current asset, if the balance of other debit balances increased in the current period compared to its counterpart in the previous period, this means that there is an external cash flow, and this is deducted from the net profit in the operating cash flow statement.

 

In our example, we have the balance of other debit balances in 2012 amounting to 1050,000 and in 2011 it amounted to 1,250,000

 

This means that it is a decrease of 200,000

 

This means that it has an internal cash flow of 200,000 pounds, to be added to the list of operating cash flows

 

Suppliers pay paper

Suppliers pay papers and their relationship with cash flows, when the suppliers ’balance in the current year is more than last year, meaning that I bought stock and payment has not been made, and this is considered an internal cash flow because it means that the goods have entered the company’s store and it is possible that they have sold and have paid their value till now

 

This simply means that it is the idea of a change in the balances of suppliers, and vice versa if the supplier’s balance decreased in the current period compared to the previous period. This means that the company paid the money for the goods, which is considered an external cash flow

 

Returning to our example

 

The balance of suppliers and notes payable in 2012 amounted to 30,000,000 pounds

The balance of suppliers of notes payable in 2011 amounted to 22,000,000 pounds

 

This means that the balance is decreased

 

Thus, an internal cash flow remains =

8,000,000 =  22,000,000- 30,000,000

 

If you go to the cash flow list, you will see the number like this 8000000 pounds is added under the terms of operational activities clauses

 

The allocations role

Suppose that we did an allowance for disputed issues of one million pounds, so the entry is

1,000,000 from the account / expense of disputed cases  

1,000,000 to the account / allowance for disputed cases

 Suppose that the court sentenced him to a fine.

 

The entry will be :

700,000 accounts / allocations are disputed issues  

700,000 accounts / creditors who raise an issue on you

 

When you pay the entry

 

700,000 accounts / creditors

700,000 accounts / bank

 

If we consider the user of the provisions as an external cash flow within the operating activities

 

In the example we have here, the user of the provisions is 700000, which is considered an external cash flow that is deducted from the items of operating activities.
 

Creditors

Creditors is any service supplier who supplies for a service, and this is the difference between creditors and suppliers, that the resource is to pure raw material entering my store, but the creditors are doing a service or importing the original.

 

Other credit balances

Due from all types of tax authority

Added value and earnings of work, discount, collection and stamp

And the Social Insurance Authority

The accrued expenses are higher for the current period

And benefits owed

And third party insurances

Dividend payables

And owed to creditors

The receivable is related parties (amounts owed to his related companies)

In order to calculate the change in creditors and other credit balances, and know whether there is an internal or external cash flow

If the balance of the creditors and other credit balances increased in the current period compared to the last period, the meaning remains that the company paid cash, and therefore there is an internal cash flow, and vice versa if the balance decreases, this means that I paid part of the higher obligations of the company and thus this remains an external cash flow

 

We return to our statement of financial position and cash flows

The balance of other credit balances

2012 amounted to 1650000 pounds  

2011 amounted to 1,450,000 pounds  

 

This means that it has an internal cash flow of 200,000 pounds, which will be added to the items of the operating cash flows list

 

 

Financing expenses

Financing expenses, like what we have said, are added in the adjustments clause to the net profit before tax in order to have their effect on the net profit.

 After that, we deduct it again in terms of operational activities, an external cash flow, and it is possible to place it under the financing activities, but on the condition of stability, meaning that it cannot be placed this year in the financing systems And next year in the operating systems

The Companies put the financing expenses within the operational activities when there is cash available from the operating activity so that anyone who reads the lists knows that their operational activity is good and enables them to pay the financing interest, so it remains here to deduct the value of the financing expenses within the items of operating activities as shown in the statement of cash flows, which is a value ( 1750000)

 

 Income taxes paid

Income tax paid is considered among the items of operating activities and is of course an external cash flow that is deducted under the of cash flows clause from operating activities, and it is included in the other credit balances.

In order to calculate the income tax paid, as we explained previously

Income tax paid under the operating activities is calculated as follows

Income tax paid under the operating activities is calculated as follows

 Tax due at the beginning of the period in the financial position + current tax from the income statement for the current period - the balance of the tax due at the end of the period in the financial position = tax paid

In the example we have income tax paid amounted to 1,250,000

It is an external cash flow that is deducted within the terms of the operating activities