Abstract
M.Com. (Business Management)
The objective of this study is to establish an alternative method in the presentation
of cash flow information in order to provide management with a more effective
technique to assist them in their decision making process.
The presentation of cash flow information in accordance with current South
African accounting standards, includes movements in working capital to maintain
operations as part of deriving the amount of cash retained from operating activities.
In this study it is suggested that movements in working capital should be treated
similarly to that of fixed assets in the cash flow statements. This implies that
movements in working capital should be included in cash utilised in investing
activities with a distinction being made between maintaining and expanding
operations.
From literature available a model was developed to incorporate the change in
presentation of movements in working capital. This change in the presentation of
cash flow information enables management to determine whether dividends are in
fact paid from internally generated cash or not.
This model was applied to financial information of seven companies quoted on the
Johannesburg Stock Exchange. The results are presented in Appendix 1 to this
study where it is demonstrated that the model developed provides a more efficient
method for cash flow reporting and that it can be adopted by management in their
decision making process...