 In our last session, we were discussing about cash flow statement. The importance, we have also seen the meaning and we were at a point of what are the major cash flow activities. Let us do a bit of revision. So can you tell now what is a cash flow statement? As the name suggests, it is statement giving the flow of cash. So for various ways in which cash is coming in and cash is going out is listed in a summary form in this statement. Now what do you mean by cash then? So it is a flow of cash plus bank balances plus a few items which qualify as cash equivalence. So when the term cash is used, we mean cash balance plus bank balance plus cash equivalence like say FD in bank which is a short term type of investment. So in cash flow statement, essentially the flow of these items are listed. Cash flow statement is very important and it gives a different information apart from P&L and balance sheet. While P&L lists out inflows and P&L lists out the incomes and expense and gives you profit. Cash flow statement tells you the cash coming in and going out and what is a net increase or decrease of cash. In balance sheet, it is a positional statement. So you will come to know what is a financial position as on a particular day. So in cash flow statement, you get much more information than a P&L account. You also get information about various items emerging from balance sheet like purchase of fixed assets, sale of fixed assets, investment, shares issued. All these transactions are given in the cash flow statement if there is a movement of cash in that particular year. That is why cash flow statement has proved to be very important for investors. So government has made it mandatory for all listed companies and also all companies where the size is more than 50 crore of turnover. It is equally important for the management to manage their own affairs to have a cash flow statement. So cash flow statement has become a very important statement today. Going towards the way it is disclosed or the way it is prepared, we should know that it is not just a plain disclosure of all receipts and payments. First the cash flows are identified and then they are categorized. How they are categorized? It has been decided that there will be three categories. One is operating, second is investing and third in financing. Last session we were discussing about examples of operating, investing and financing activities. Let us continue from that. So you can see that all activities can be classified into these three again shown in a graphical form. So operating are the activities which are day to day nature, investing example is purchase of land, financing example is loan taken. Now let us see what is an operating activity? As the name suggests, it is an activity which is day to day in nature, which is related to normal business operations. It has been defined as these are the principal revenue producing activities of the enterprise and one example I have given here we had also discussed it last time that is a cash receipt from sale of goods or rendering service. Usually if the company is in the business of trading or manufacturing, most of their will income will come from sale of goods and in case of service companies, let us say IT company, BPO or professional for them they will render service and receive cash. So that is important example of operating activity. Can you think of some more example? Last time I think we had thought of five examples. Please think of one more. What could be the other activity which classifies as operating? Let us say payment of electricity bill. So if you are running a shop or a business or office, you will have to pay electricity bill. Payment of electricity bill is a day to day activity, so it will classify as an operating activity. Though the definition says principal revenue producing, it does not mean it should always be a receipt, either receipt of revenue or the expenditure which is incurred to generate that revenue, both are covered as operating activity. So a few more examples given here, cash receipt from royalties, fees, commission or the payment made to supplier of goods or the payment to and on behalf of employees like say salary, wages, bonus all these are operating activities. Now let us go to investing activities, a little more on operating activities first see. Now when it comes to disclosure of operating activities, there are two ways it can be disclosed either by a direct method or by indirect method. Now in direct method, total receipts and payments from various activities are shown. This is an example of a direct method. So cash receipt from customer, so when customers pay cash that much amount will be shown, cash paid to suppliers, cash paid to employees, cash paid for various operating expenses like electricity, like say rent, these will be all separately shown. Same way income tax will be shown. Now the total of all these items will be net cash from operating activities. This is one way of showing or disclosing cash flows from operating activities. There is another method which is known as indirect method. Now is it good to have this direct method, what will be the problem of a direct method? Now the deficiency of direct method is this is very close to what we are showing in P and L account. So in P and L account also we show sales, we show purchases, we show payment of salary, we show payment of say electricity, we will show payment of bonus, payment of let us say license fees, royalties all those items will be repeated again in the cash flow statement if we use direct method. It is not so much desirable to have duplication of items. That is why instead of direct method, another method which is known as indirect method comes. Now in indirect method what happens is, it is presumed that all cash flows, all P and L items will always lead to inflow and outflow. So we will not repeat all those items. So like in direct method we had shown let us say payment to employees or payment of operating expenses they all will not be repeated. Instead of taking all these items, we can just take one figure which is profit. So there is no need to show all 100 items of incomes and expenses, we will simply take profit. But will the profit be equal to cash received from operating activities? It may not be because there will be few items which are different. But what is done in indirect method is instead of listing all items separately profit is taken as a proxy for all those receipts and payment and then few items which are non-cash or non-operating in P and L account only they are to be adjusted. So we start with profit, make a few adjustments that gives us cash received from operating activities. AS-3 or IS-7 they recommend use of indirect method that is why most of the entities it is preferable to go for indirect method. Now can you imagine what will be the adjustments from P and L to cash flow? Just give a thought just think of which items are adjusted one or two items you can easily if you visualize a P and L account and see all the items in P and L just imagine whether they will also be in the cash flows. If something is not there we will need to adjust I will help you out. Let us list down 10 expenses and if they are also cash expenses no adjustment if they are not it needs adjustment go on telling me 10 expenses. So we have salaries, wages, electricity bill, telephone bill anything else 4 are over maintenance cost, travelling expense, depreciation, interest paid any other royalty paid one more think of rent paid. Any other example also you can take just for example we have taken 10 items. Now all these 10 items do they they are from P and L account should they come in the cash flow also are they your payments as well as far as salaries, wages, maintenance, electricity, telephone, royalties they are all expense and also payments. However when it comes to depreciation it is an expense but it is not a payment did you get it. So depreciation is not being paid but still it comes in P and L that is why depreciation does not appear or should not appear in cash flow statement. Now what we do is we start with profit and those items which need to be changed which are not cash in nature we will adjust that is why we will adjust for depreciation. So we will adjust for non cash and non operating items one of the examples is depreciation. So we will start with profit we will adjust for depreciation because it is non cash. Same way out of the 10 items which we just now jotted down is there any non operating item involved one item which I talked was interest. Now why do you pay interest interest is paid because we take loan. So we take loan on that loan we pay interest that is a financing activity. So raising money by way of loan and paying interest are financing activity. So though interest is shown in P and L it should not be shown in the operating activities that is why it needs adjustment. So as we are discussing all non cash and non operating items are adjusted. So one example was depreciation other example was interest paid. Same way you can have some more items like dividend received interest received or profit or loss from sale of fixed assets because it is from sale of fixed asset it goes into investing activity it should not come as operating activity. So such items need to be adjusted. Let us see the format. Now this is the format in which the statement will be shown you start with retain earnings then add dividend paid adjust for income tax you get net profit before tax. Then you have to add for those items which are non cash or non operating in nature. So you will adjust depreciation loss on sale of asset interest provision for back dates. These are all need to be added same way you will reduce interest or dividend received and a profit on sale of assets. So have you understood if we go back you will realize that non cash and non operating items need to be adjusted. So examples of such items are depreciation interest profit or loss from sale or purchase of fixed assets these items are being adjusted. Now once you adjust these items you will get fund from operations. So this is the money which is generated from operation but this does not mean that much of cash is generated from operation why because say if I sell goods I need not always receive money I am selling goods but not receiving cash then it becomes item which is shown in debtors. So any increase or decrease in debtors also is required to be adjusted. So we start from fund from operation and then add or less the current assets and liabilities that gives me net cash flow from operating activities when we will solve few sums it will be more clear to you but right now you can see the format. So we start with retain earnings arrive at net profit before tax we make necessary adjustments to get fund from operations again we adjust current assets and liabilities which gives me net cash flow from operating activities. Now let us go to investing activities. Now what is meant by investing activity as the name suggests it is something to do with investment of money where do you invest one is you may invest in various securities like say buying of shares buying of debentures of another companies you can also invest your money in fixed assets. So if I pay money to buy machinery I am going to use it for next 3 4 years that will be a investing activity. If I construct a new building I am going to use for next 25 years it is an investing activity. So all those activities which are related to long term assets and investments are related to investing activities it will cover both buying as well as selling that is why acquisition and disposal of long term assets. So if you acquire and dispose of say any shares equity instrument any debt instrument property fixed assets they are all within the definition of investing activities. Now can you give me some examples think of and please tell me 5 examples of investing activities. In fact if you read the definition itself you can come out with 5 examples. So one example which is very apparent is acquiring some fixed assets. So say purchase of machinery sale of land purchase of equity shares sale of shares purchase of debentures over 5 examples. If you want to add few more you can add let us see a few examples. So cash payment for purchase of fixed assets cash receipt from disposal of fixed assets purchase sale of shares and so on. So these are the examples of investing activities. Now let us see what is the third which is financing. So we have talked about operating we have also talked about investing. Now let us look at financing. Now to run any business I need money. So whatever I do to raise the money is actually known as financing activities. It is defined as those activities which result in change in the size and composition of owner's capital or borrowing. Now you think of suppose I want to start a company how will I be able to raise the money which I need to run the company. Actually I will issue shares to public that is known as IPO or FPO. So by making a public issue of shares I may raise money. I may approach bank take loan. I may approach people issue them debentures take money or as I buy or as I take loans I need to repay also. So I have to repay the loan I have to pay interest on loan all these are classified as financing activities. Now number of examples I have given. Now you think of and come out with 4, 5 examples 5 examples. In fact you look at the screen you can understand I mean you can come out with examples. I have listed a few examples here so issue of shares. Now in case of issue suppose I am a company I give shares I receive money same way I may buy back shares. That is where shares are with public my own shares which I have issued I take them back pay them money that is known as buy back of shares. So exactly opposite of issue. So issue of shares buy back shares same way issue or redemption of preference shares. So I can issue shares get money after say 5 years or 10 years those shares are cancelled I pay back money. So that is known as redemption of preference shares. Same way redemption or issue of debentures. Then I have taken loan or I repay the loan by installments. So taking loan repaying loan and related activity is giving dividend because I am giving dividend to shareholders or I am paying interest to bank. So dividend and interest paid these are also financing activities. So I think it is clear to you now all the 3 activities we have operating investing financing. Now let us understand 2 items which are we have already seen but sometimes it is confusing. So interest now what happens is interest as I receive it. I receive is because of my investment. So if I pay say invest money in bank in the form of fixed deposits they will give me interest. So interest received is essentially an investing activity. Sometimes money is invested for a very short period that is where it is in the nature of cash equivalent we have discussed it that if the fixed deposit is kept let us say only for 7 days it may classify as cash equivalent. In that case if I receive interest it will be classified as an operating activity but generally interest received is an investing activity. If I receive interest from my normal business activity let us say interest is charged on debtors they pay me late. So I charge them interest that will be an operating activity. Now in case of a financing enterprise let us say bank their normal business is to give loans and receive interest. So for a bank interest received is an operating flow is it clear to you? So for any normal company any manufacturing or a trading company interest received is an investing flow. Now what are the exceptions? If interest is received on cash equivalent or from debtors it becomes operating and for a bank or a financial institution interest received is always operating are you getting? Now let us look at the other side that is interest paid. Now why do I pay interest? Suppose I take loan from bank I have to pay them interest. So taking loan is a financing activity that is why paying interest is also a financing activity got it? So usually for any normal company interest paid is a financing activity. However there are two exceptions one is if interest is taken for day to day activities let us say for a very short period or if loan is in the nature of working capital loan. So when loan is taken to finance current assets or day to day activities it is called as a working capital loan. So interest paid on such loan is a operating activity operating flow. In case of banks or financial institution their main business is to receive interest is to take loans and give loans that is why interest paid for a bank is treated as a operating of flow. Let us say customers deposit money with the bank as a fixed FD fixed deposit bank has to pay interest it is their normal business to take FDs and give interest. So it is a operating flow. So we have looked at interest received and interest paid. Now can you think of any other similar item somewhat similar item is dividend. So again if dividend is received where will you classify when do we receive dividend. If I have purchased shares of some other company I have invested my money and purchase shares that company will give me dividend. So it is essentially coming from investments. So again it will be classified as an investing flow let us have a look. So for any non-financial enterprise in dividend received is an investing flow. What about dividend paid sorry what about financial enterprise say like a bank for them it is their normal business to make investments receive dividend etcetera. So it is treated as a operating flow. What about dividend paid? So dividend paid what happens is when I raise money say I issue shares to people to receive the capital and I give dividend to my shareholders. So it is in the nature of financing activity. So whether for a financial enterprise or a non-financial enterprise dividend paid is always a financing activity is it clear to you. So we have looked at four special items that is interest received, interest paid dividend received dividend paid. Now we are going to look at cash flow statement or a P and L and balance sheet of reliance industries limited. Now I have tried to show you balance sheet of reliance for two years there are a few items of profit and loss account are also shown. Now based on this information we will try to prepare cash flow for reliance. I think once you see the sum once you see a case it will be far more clear to you as to how the cash flow statement is prepared and what does it convey. Now is it clear to you what has been done is two years data 2009 and 10 is given difference is also found. So any increase in that item can be seen in this column. Now using this information how can we prepare cash flow statement? As we all know the first thing we have to do is identify whether the item is in flow or out flow I mean whether the item is cash flow and if it is a cash flow then categorize is as operating investing and financing. Now let us try to do one thing let us try to look at each item and then identify it as O, I or F I think the based on the discussion which we had it should not be much difficult for you to classify. So the first item equity share capital. So opening balance of equity capital was 1574 it has increased to 3270. Now is it operating investing or financing if it is a cash flow? First of all is it a cash flow? I think yes because the money has come in capital has increased so money has come in. So it is a cash flow is it operating investing or financing? Let us think a bit operating the HONESACTA it is not a day to day activity neither it is investing because it is not that reliance is putting the money it is the capital issued by reliance for financing their business so it is a financing activity. So let us classify it as F. Now I will advise you that after we do the sum you can yourself take a balance sheet of any one company and try to do a similar exercise let us do it first. So equity share capital increase so it is a financing activity that is why I have marked it as F. Is it a inflow or outflow? It is basically an inflow why it is a inflow? Because the capital has increased so reliance issued new shares and money has come in. So it is F and inflow. Reserves what do you mean by reserves? Reserves represents the accumulated profits of the company. So I should categorize that which type of flow is it O, I or F definitely it is O because reserves represent the profits and profit is a day to day activity we will have to adjust it later but to begin with it should be marked as outflow it should be marked as operating flow and it represents inflow because reserves sorry reserves have gone down normally reserves increase then it becomes inflow in this case since the reserves have gone down it represents outflow are you getting me? Now we will go ahead third is secured loans secured loans will fall in which category? It is a financing item because reliance has taken loans and raise the money to run the business it is a financing activity is it a inflow or outflow? See the amount of loan has increased from 10, 698 to 11, 671 so increase in the loan means money has come in. So categorize it as inflow next item is unsecured loan how will you categorize it? Again it is a F financing item because raising a loan for financing the business so it is a financing item should it be inflow or outflow you are outly grace it is an outflow because you can see here loan has decreased from 63 to 50,000 so money has been paid to reduce the amount of loan so I think now you are getting how to solve a problem. So we are going to identify each item as OIF and also identified as N or out. Now total liabilities should it be classified as OIF? The answer is no because actually it is only a total it does not represent any flow so I will just put it xx to avoid any mistake. Now application of funds the first item is gross block gross block where will you classify? What do you mean by gross block do you remember what is a gross block? When we studied balance sheet we had discussed about the gross block it represents fixed assets at cost so this is the original cost of fixed assets. Now is this it will come in which category is it OIF or F? I think everyone will agree it is I it represents investing flow is it a inflow or outflow? I have purchased new fixed assets I must have paid money so it represents outflow are you all getting me? So gross block is I out accumulated depreciation where will it fall? Is it a cash flow first of all and should we take it as OIF? Slightly a tricky item actually it is not a cash flow because depreciation is neither received nor paid however it is an item in PNL account if you remember we are going to use indirect method. So in calculation of operating flows we will start with profit and make various adjustments one of the adjustments is required to be made for depreciation that is why I will categorize depreciation as O it is related to operating flows and it requires to be adjusted see most of the operating flows will require adjustments. So O adjust next item is net block what is the net block how should I categorize it actually net block is gross block minus depreciation. So it is not a separate item I have just marked it as xx I should not take it investments you can see investments have decreased from 20 to 19 under what category it should come it should naturally come as I because it is a investing and is it inflow or outflow it is a inflow because investments have decreased from 20 to 19 money has been paid off sorry money has been received dividend investment has been sold and money has come in. So it is a inflow next item inventories or stocks where should it go? Is it a cash flow and where should it go it is an operating item again if you remember we have seen that we calculate operating items by indirect method. So we are going to adjust for all current assets and current liabilities in operating now is it inflow or outflow you can see the inventories have increased from 14 to 26 when asset has increased naturally I must have paid for it. So it is a outflow next item is debtors where should debtors go inflow or outflow and is it first of all a cash flow the answer is yes I am going to categorize all current assets and liabilities as O. So sundry debtors is O you can see the balance of debtors has increased again it has increased because it is an outflow cash and bank balance this is a special item I am going to mark it as C why C because it is neither I, O, F it is not a flow at all it is a cash and cash equivalent. So since its cash do not mark it as in or out it is simply a cash. So it should be separately recorded total current assets should I show it answer is no I am just marking it is a xx because it is neither inflow nor outflow it is a total loans and advances what do you mean by loans and advance again slightly a tricky item do not confuse it with this secured loans this secured loans etcetera are loans raised loans taken whereas these loans and advances represents the advance given to employees or advance given to some suppliers they are day to day in nature. So they should be categorized as O you can see the loans and advance balance has decreased from 13 to 10. So when the asset falls it represents an inflow right. So inventory increased we called it outflow loans and advances decreased it is a inflow we will see it later. Now total C A loans and advance should we take it the answer is no it is xx because it is neither inflow nor outflow we should ignore it it is a total current liabilities should I mark it as OIF yes because all current assets and current liabilities are going to be adjusted in operating flows you can see current liabilities have increased is it inflow or outflow just think of it it is slightly tricky when do current liabilities increase when I do not pay them. So suppose I do not pay salary the outstanding salary will increase if I do not pay suppliers outstanding suppliers balances will increase or creditors will increase. So increase in current liability means I have paid less money indirectly speaking I have received more money. So it is marked as inflow I know it is slightly tricky it does not mean that actually debtors creditors have paid me or employees have paid me but indirectly what happens is because I do not pay money to employees on time they become current liabilities. So because the salary is not paid I have more cash in hand that is why increase in current liability should be marked as inflow if you get slightly confused what you can remember is it is exactly opposite of current assets. So if inventory there was a you can see there was a increase in inventory I have marked it as outflow by similar logic increase in current liability should be marked as inflow. Next is provision provision and current liability is almost one and the same thing. So provision means provision for bonus provision for taxes they also represent unpaid expenses. So they are o and inflow because I have paid less their balances have increased so it is an inflow. Now total current assets and liabilities shall I take it no because it is simply a total I will mark it as xx net current assets shall I take again no because these are again just current assets minus current liabilities are shown as net current assets. So again I am marking it as xx total assets should not be taken I am marking every item as o i f cash x because you should not have any confusion contingent liability how it should be marked what is a contingent liability we have discussed it do you remember it represents those liabilities which may occur because of happening of some uncertain event as of now they are not liabilities they are not a part of balance sheet total. So I am not going to consider let us mark it as xx book value what is a book value we have not yet discussed we will discuss it in later chapters but in short what I can tell is these are not the part of balance sheet they are just given as extra items. So I am not going to consider them they do not represent anything like inflow or outflow they are just given as footnotes to balance sheet current liability and book value just ignore them. Now let us go to PNL items PNL items are also very tricky first item is sale turnover should it be taken as o i f or it should be marked as xx very tricky item we feel it should be taken as a inflow but actually it is xx if you remember we have discussed that all operating flows we are going to do it by indirect method. So we will not list all items separately only those items which need adjustment will be shown that is why sale turnover I have marked it as xx excise duty again xx keep in mind that day to day items in PNL account will not be taken in the cash flow statement net sales xx just ignore it other income again xx you just ignore it because it is not separately shown in the cash flow statement raw materials purchased ignore them because purchase of raw material no doubt we must have paid money for it but we will take it through profit. So we will not record them power and fuel cost again ignore it employ cost ignore put it xx other manufacturing expense again xx selling and admin cost again xx interest shall I mark it x no it is a tricky item we have discussed that interest should be taken in the cash flow statement we will adjust for it. So it will come in which category if you remember our discussion interest why do you pay interest because we have taken loan to raise the finances we pay interest. So interest basically is a financing activity right interest paid interest means interest paid it is a financing activity I will also mark it as O it is not operating activity but it will be shown in finances and it will be also adjusted in PNL it represents the outflow but it also needs an adjustment keep in mind all items which are outside the balance sheet normally we do not take them but if they are needed to be taken they will have two effects I hope you remember the system of double entry. So every transaction is bound to have two effect balance sheet items we do not take two effects because balance sheet is already tallied both the effects are accounted but when we take an extra item like interest it is a financing item it will require adjustment in operating that is why I have marked it as FO and it has been shown as outflow adjustment. Now you will understand it slowly let us try to complete the case I hope now you can see all the items which have been properly categorized as OIF we have also marked it as outflow and inflow. Now let us take one by one these items into cash flow statement and see how will they be appearing in the cash flow I will show you the cash flow statement prepared from this I will increase the view so that it is very clear to you. Now let us see one by one how the items have been taken do not suddenly look at the solution we will see one by one items the first item was equity share capital it is a financing item that is why it was taken here issue of equity shares this is nothing but that item of equity share capital I will go on marking each item I hope it is very clear to you. So equity share it is F inflow that means 1697 was the money which was received by the company by issue of shares that is why issue of shares it is marked as financing inflow this is our cash flow statement issue of share and I have written 1697 under the category financing the first one is investing this is operating and this is financing I will just write a title so that it is more clear to you right are you getting me now let us go to the next item we had marked reserves as O because it is an operating activity it represents the profits let us go to solution in operating activity the first item was net profit actually this net profit is nothing but amount coming from reserves. So reserves go into profit that is why in cash flow statement I show as net profit minus 97972 you can see here now the third item secured loan we have marked it as F inflow let us go to financing flow we have an item called secured loan here. So secured loan taken because company has taken a new loan amount is 973 so under financing flows it is marked as inflow next item is unsecured loan the amount is 12382 marked as F out. So payment of unsecured loan it is written as payment because unsecured loan has been repaired and you can see here a negative sign is used minus 12382 what does a negative sign show it shows that it is an outflow we do not show inflow separately outflow separately the items like 1697 and 973 they are inflows so they have a plus sign whereas 12000 has a minus sign. So all the items up to this are already taken care are you getting me now let us go to next item gross block we have marked it as I out so we will go to the cash flow statement we have listed here investing activities I am giving you the title so it is now marked here as purchase of fixed asset because increase in the gross block represents purchase of fixed asset it has a negative sign you can see here gross block I out see that there is a increase so negative sign of 12000 is not carried there that was outflow so it was marked negative in this case 9000 represents an outflow so again it is marked negative similarly we will consider other items accumulated depreciation it is an item in P and L account so it requires adjustment so you can see here P and L then depreciation 13000 has been added next item is investments it represents an inflow marked as I so I am taking it here under investing flow as sale of investment I am going a bit fast I hope later on you can see this and understand now next item is inventories marked as O outflow so we will go into operating activities the first activities listed here are all operating I will also give a title to make it more clear to you please have a look as to how they are shown here we use indirect method that is why we start with net profit we have already added depreciation we were at inventories so you can see here increase in inventory which is a negative figure we have already discussed that inventories it is O and out sundry debtors again O and out so minus 7000 next item was cash now this is a item of cash balance that is why it is not listed as flows it is shown in the end as cash and cash equivalent we have two balances opening was 23 closing is 362 so they are separately shown here after first of all all flows will be listed and then cash and cash equivalents are separately listed next item is loans and advance it is O in so you can see here loans and advance decrease in loans and advance it is an inflow current liabilities again O in provisions also O in so both these items are shown as O in now all the items from balance sheet are over only one item remaining you can see the last item that is interest paid it is F O and adjusted it has two effects so see it carefully we have interest expense of 2000 so it is shown here as interest expense of 2000 it is a financing flow we will also show it as interest expense as operating flow now at this stage we will stop so we have listed all operating items we have also listed all investing item and we have listed all financing item so the total of each category is taken operating total investing total financing total so there is a net decrease of cash of 23 to this we add opening and we get the cash and cash equivalent at the end as 362 this should not be at the beginning this should be at the end so we started with beginning cash of 23 and in the end we have got cash of 362 have a look at problem once again so this was one of the items which we have adjusted though I have not told you so I will just show it here so other income is an investing item this other income was interest received so it was adjusted here as interest income and it was also adjusted as investing flow I hope now the basic understanding is reached maybe we have to see little more problems it is not that only in one problem you can understand but at least try to look at the format we start with operating then add investing then add financing so from the balance sheet any change like increase or decrease in asset and liability comes to cash flow statement we will adjust item like interest depreciation dividend received paid that gives us operating flows we add investing flows add financing flows we get the total cash received then we adjust the opening cash balance that gives us the closing cash balance thank you so much so in our next session we will do a little more cases on cash flow statement thank you.