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92 Corporate Finance BRILLIANT’S

other than investing and financing activities. H$mo N>mo‹S>H$a) H$mo gpå_{cV {H$`m OmVm h¡Ÿ& CXmhaU Ho$
For example, for a textile mill, the main
{cE, EH$ Q>oŠgQ>mBc {_c H$m _w»` H$m`© H$nmg H«$`
operation is to buy cotton and convert the
H$aHo$ Cgo _erZm| Ed§ l{_H$m| H$s ghm`Vm go `mZ© d H$n‹S>o
same into yarn and cloth with the help of
human resources, plant and machinery, etc. _| n[ad{V©V H$aZm h¡Ÿ& Bg{cE Cg {_c H$s Am°naoqQ>J
Therefore, the cash flows incidental to purchase
EpŠQ>{dQ>rO go H¡$e âbmo _| H$nmg H$m H«$`, doVZ Ed§
of cotton and other inputs, payment of salaries
_OXyar H$m ^wJVmZ VWm H$n‹S>o VWm `mZ© Ho$ {dH«$` go
and wages, receipts from sale of cloth and yarn
may be regarded as operating cash flows. àm{ßV`m§ gpå_{cV h¢&
The amount of cash flows arising from Am°naoqQ>J EpŠQ>{dQ>rO go CËnÝZ H¡$e âbmo Bg ~mV
operating activities is an important indicator H$m _w»` gyMH$ h¡ {H$ B§Q>aàmBO Zo AnZr Am°naoqQ>J
of the extent to which the operations of the
enterprise have generated sufficient cash flows H¡$no{gQ>r H$mo ~Zm`o aIZo, {S>{dS>oÝS> Ho$ no_|Q>, bmoZ Ho$
to maintain the operating capacity of the [a-no_|Q> Ho$ {cE Ed§ Z`o BÝdoñQ>_|Q> Ho$ {cE AnZo ñd`§
enterprise, for payment of dividends, for Ho$ òmoVm| go n`m©ßV _mÌm _| H¡$e âbmo CËnÝZ {H$`m h¡Ÿ&
repayment of loans and to make new
investments with own resources.
Since, the operating activities are My§{H$ Am°naoqQ>J EpŠQ>{dQ>rO _| _w»`V: B§Q>aàmBO H$s
primarily concerned with principal revenue aodoÝ`y CËnÝZ H$aZo dmcr EpŠQ>{dQ>rO H$mo gpå_{cV {H$`m
producing activities of the enterprise, the OmVm h¡; Bg{cE Am°naoqQ>J EpŠQ>{dQ>rO go gå~pÝYV H¡$e
examples of cash flows from operating âbmo Ho$ CXmhaU {ZåZ{c{IV h¢:
activities are:
(a) Cash receipts from the sale of goods and (a) JwS²>g Ho$ {dH«$` Ed§ g{d©gog àXmZ H$aZo go H¡$e
the rendering of services; H$s àm{ßV`m§;
(b) Cash receipts from royalties, fees, (b) am°`ëQ>rO, \$sg, H$_reZ Ed§ AÝ` aodoÝ`y go H¡$e
commissions and other revenue; H$s àm{ßV`m§;
(c) Cash payments to suppliers of goods and (c) JwS²>g Ed§ g{d©gog Ho$ gßbm`g© H$mo H¡$e _| ^wJVmZ;
services;
(d) Cash payments to and on behalf of emplo- (d) H$_©Mm[a`m| H$mo Ed§ CZH$s Amoa go H¡$e _| ^wJVmZ;
yees;
(e) Cash receipts and cash payments of an (e) {H$gr ~r_m H$ånZr Ho$ àr{_`_, Šbo_, EÝ`yQ>r Ed§ AÝ`
insurance enterprise for premiums, nm°{cgr cm^m| Ho$ {cE H¡$e àm{ßV`m§ Ed§ H¡$e ^wJVmZ;
claims, annuities and other policy benefits;
(f) Cash payments or refunds of income taxes (f) BÝH$_ Q>¡Šg H$m H¡$e ^wJVmZ `m dmngr O~ VH$
unless they can be specifically identified {H$ CZH$s nhMmZ ñnï> ê$n go \$m`ZopÝg¨J VWm
with financing and investing activities,
BÝdopñQ>¨J EpŠQ>{dQ>rO Ho$ ê$n _| Zm H$s Om`o VWm
and
(g) Cash receipts and payments relating to (g) â`yMa H$m°ÝQ´>oŠQ>, \$m°adS>© H$m°ÝQ´>oŠQ>, Am°ßeZ H$m°ÝQ´>oŠQ>
future contracts, forward contracts, option VWm ñd¡n H$m°ÝQ´>oŠQ> gå~pÝYV H¡$e àm{ßV`m§ Ed§
contracts, and swap contracts when the ^wJVmZ ~eV] {H$ `h H$m°ÝQ´>oŠQ> S>rqbJ `m Q´>oqS>J
contracts are held for dealing or trading H$m`m] go gå~pÝYV hmoŸ&
purposes.