Cash Flow Statement Singapore | Essential Guide For You (2024)

Cash is the lifeblood of any business, providing the fuel it needs to operate, expand, and thrive in the competitive marketplace. Fortunately, there is a financial tool that can shed light on theinflows and outflows of moneywithin your organization: the cash flow statement. This vital financial statement serves as a comprehensive record of your business’s cash activities, providing a clear picture of how cash is generated and utilized over a specific period. In this blog post, we will delve into the significance of a cash flow statement Singapore businesses should know about. Read on to discover how this financial tool can empower your business and drive it toward success.

What Is Cash Flow Statement In Singapore?

Thiskey financial statementprovides a thorough overview of the inflows and outflows of cash within a business during a specific period. A cash flow statement gives a clear picture of how cash flows through the business, highlighting both the sources—sales income, investments, and loans—and the uses—expenses, investments, and debt payments—of the cash.

Structure of a Cash Flow Statement In Singapore

Cash Flow from Operating Activities (CFO)

Also referred to as cash flow from operations, CFO pertains to the cash generated by a company’s operational activities during a specific timeframe.This category of cash flowis commonly documented in the cash flow statement, which, when combined with the income statement, provides essential financial insights about the organization.

Cash Flow from Investing Activities (CFI)

This involves the cash inflows and outflows arising from non-operational activities, such as long-term investments in stocks, bonds, or the acquisition and disposal of assets like property, plant, and equipment. It also provides insight into whether the company has gained or lost cash due to these activities, resulting in either a positive or negative cash flow.

Cash Flow from Financing Activities (CFF)

This includes the movement of cash associated with external investors and lenders. This section of the cash flow statement sheds light on activities concerning the company’s capital structure and its interactions with external sources of funding. When there is a negative cash flow, it may indicate the need for external equity to sustain the business.

Disclosure of Non-Cash Activities

This section identifies cash sources unrelated to income, such as proceeds from asset sales, exchanges, loan repayments, and stock splits. Additionally, it encompassesnegative cash flowsthat are not explicitly presented on the cash flow statement, including depreciation and amortization.

Key Components of a Cash Flow Statement In Singapore

A cash flow statement has several components that help to painta comprehensive pictureof the cash flow of the organization. These components include:

• Operating Activities: This section focuses on the cash generated or used in the core operations of the business. It consists of payments made to suppliers and employees, cash flows from sales of goods and services, and other operating costs.
• Investment Activities: This section captures cash flows related to investment decisions made by the business, such as investments in securities or other businesses.
• Financing Activities: This focuses on the financial flows associated with business finance. It includes cash flows from borrowing or repaying loans, issuing or repurchasing shares, and paying dividends to shareholders.
• Net Income: Net income is an important component of the cash flow statement as it provides a starting point for reconciling the company’s profitability with its cash flow. It aids in ensuring that the reported net income and thecash flows from operating operationsare in line.

Reading the Cash Flow Statement in 4 Simple Steps

Step 1: Adjustments for non-cash items

The first step in reading your cash flow statement is to account for non-cash items. These are expenses or revenues that do not involve the actual movement of cash. Examples of non-cash items include depreciation, amortization, and non-operating gains or losses.

Step 2: Changes in operating assets and liabilities

This process entails analyzing the changes in inventories, accounts payable, accounts receivable, and other current assets and liabilities. An increase in accounts receivable, for instance, indicates cash that has not been collected yet, while an increase in accounts payable signifies cash that has not been paid out.

When you invest in fixed assets to support the running of your business, it is essential to note that this expenditure is not recorded as an expense in your profit and loss statement. Instead, it is recognized as an asset on your balance sheet, representing something you own. This indicates that the financial impact of buying the asset has yet to be accounted for in the profits, and you’ll need to add it back in at this stage of the cash flow statement analysis.

Step 3: Sale and purchase of fixed assets

When you invest in fixed assets to support therunning of your business,it is essential to note that this expenditure is not recorded as an expense in your profit and loss statement. Instead, it is recognized as an asset on your balance sheet, representing something you own. This indicates that the financial impact of buying the asset has yet to be accounted for in the profits, and you’ll need to add it back in at this stage of the cash flow statement analysis.

Step 4: Proceeds from long-term loans

Examine any cash inflows resulting from obtaining long-term loans, as they provide additional funding for the business. This step helps you understand the financial resources available for the company’s operations and investment activities.

Impact on GST-Registered Businesses

For GST-registered businesses, the cash flow statement in Singapore plays a significant role in managing theirGoods and Services Tax (GST)obligations and overall financial operations. Here are some key impacts of the cash flow statement on GST-registered businesses:

• The cash flow statement provides a clear picture of the company’s cash inflows and outflows, enabling accurate GST reporting.
• The cash flow statement helps businesses assess their cash position and plan for GST payments.
• The cash flow statement can impact the timing of input tax claims for GST-registered businesses.
• The cash flow statement assists GST-registered businesses in financial planning and budgeting.
• A well-managed cash flow is crucial for GST-registered businesses to meet their GST obligations and maintain financial stability.

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Cash Flow Statement In Singapore – Frequently Asked Questions