Indirect Method Cashflow

CFA Level I FRA
#1

Hi,

I am trying to produce the cash flow statement from P&L and Balance Sheet.

I have started with Net Income and adjusted all the items I believe is required (see attached screenshot). However the net cash flow calculated doesn’t match the increase in cash from the Balance Sheet.

Could someone please let me know what I am missing?

Thanks!!

#2

Could anyone please advise?

Looking at the B/S, I believe I have accounted for all the changes in current assets and liabilities.

Also, I have added back the loss reported from P&L.

Thanks!!

#3

It is really ambiguous to prepare the Cash Flow Statement without any Notes, just based on the B/S and Income Statement to make the Cash Flow is not enough evidence. For example, the Reserve account in the Equity, Reserves are sometimes set up to purchase fixed asset pay an expected legal settlement, pay bonuses, pay off debt, pay for repairs and maintenance, and so forth. So we can’t know exactly what amount of Reserve will be allocated to CFF.

I see some mistake on the CFF:

  1. the cash paying for Dividend is 859 ( 16,394 +$ 10,459 - Dividend = $25,994)

  2. The Increase in Fin Asset cannot be allocated to CFF because the financial asset is a tangible liquid asset that gets its value from a contractual claim. Cash, stocks, bonds, bank deposits and the like are examples of financial assets.