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Ascertainment of Cash flow from Operating Activities Video Lecture | Accountancy Class 12 - Commerce

41 videos|106 docs|56 tests

FAQs on Ascertainment of Cash flow from Operating Activities Video Lecture - Accountancy Class 12 - Commerce

1. What is cash flow from operating activities in commerce?
Ans. Cash flow from operating activities in commerce refers to the amount of cash generated or used by a company's core business operations, such as sales, production, and delivery of goods or services. It reflects the cash inflows and outflows directly related to the company's day-to-day operations.
2. How is cash flow from operating activities calculated?
Ans. Cash flow from operating activities is calculated by adjusting net income for non-cash expenses and changes in working capital. It is typically derived using either the direct method, which directly reflects cash inflows and outflows from operating activities, or the indirect method, which starts with net income and adjusts it for non-cash items and changes in working capital.
3. Can cash flow from operating activities be negative?
Ans. Yes, cash flow from operating activities can be negative. A negative cash flow from operating activities indicates that a company is using more cash in its core operations than it is generating. This could be due to factors such as a decrease in sales, increase in expenses, or poor management of working capital.
4. What are some examples of cash flow from operating activities?
Ans. Examples of cash flow from operating activities include cash received from customers for the sale of goods or services, cash paid to suppliers for inventory, cash paid to employees as wages, and cash paid for taxes and other operating expenses. It also includes interest received or paid on operating activities and any other cash flows directly related to the company's core operations.
5. Why is cash flow from operating activities important in commerce?
Ans. Cash flow from operating activities is important in commerce as it provides insights into a company's ability to generate cash from its core operations. It helps investors and stakeholders assess the company's financial health, its ability to meet its short-term obligations, and its capacity for future growth. Positive cash flow from operating activities is generally seen as a positive sign, indicating that the company's operations are generating sufficient cash to support its ongoing business activities.
41 videos|106 docs|56 tests
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