Understanding Cash Flow Statements

International Accounting Standards (IAS) requires European Union (EU) companies to present a cash flow statement that shows the historical changes in cash and cash equivalents during a specified period of operations for a company. With the cash management functionality in the JD Edwards EnterpriseOne General Accounting system, you can comply with the requirements for creating a cash flow statement that separates these operating, investing, and financing activities:

• Operating - Cash flow from principal revenue-producing activities, such as cash receipts from the sale of goods and services, and other activities that are not investing or financing activities.

• Investing - Cash flow from the acquisition and disposal of long term assets and other investments that are not included in cash equivalents.

• Financing - Cash flow from changes in the size and composition of the equity capital and borrowings.

These three activities affect cash and each must be analyzed separately on the statement of cash flow that show the cash-related activities of your business, as required by IAS-7.

A cash flow statement provides:

• An overview of the major sources of cash flow for your business.

• An assessment of the current liquidity of your business.

• A way in which to estimate future cash flow, based on historical changes.

• Information about cash flows generated from trading, as well as other financial activities.

You can use cash flow statements to analyze your cash flow and produce reports by fiscal period over one or more bank accounts for a company.