Cash flow statements help the company to identify the uses and sources of the cash flow. The creditors and suppliers will be interested to know that the company will be able to pay the interest and debt obligations, hence the cash flow statement will be useful for the creditors, and suppliers. Verified Answer
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A large disparity between the amount of reported income and the net change in cash flows could indicate that there is fraud in the preparation of a company's financial statements. The statement of cash flows is particularly important when an acquirer is reviewing the financial statements of a potential acquiree.
The acquirer does not want to pay a price that cannot be supported by the cash flows of the acquiree, so it uses the statement in order to confirm the amount of cash flows generated. The statement also reveals the sources and uses of certain cash flows, which would not otherwise be readily apparent to the reader.
These line items include changes in each of the current asset accounts, as well as the amount of income taxes paid. The statement of cash flows is part of the financial statements, which also include the income statement and balance sheet.
1. The primary purpose of the statement of cash flows is to provide information about cash receipts, cash payments, and the net change in cash resulting from the operating, investing, and financing activities of a company during the period.
A cash flow statement shows the exact amount of a company's cash inflows and outflows over a period of time. The income statement is the most common financial statement and shows a company's revenues and total expenses, including noncash accounting, such as depreciation over a period of time.
The main purpose of the statement of cash flows is to provide information about a company's cash receipts and cash payments in a period. The statement of cash flows provides information about a company's operating, financing, and investing activities.
The statement of cash flows is one of the most important financial reports to understand because it provides detailed insights into how a company spends and makes its cash. By learning how to create and analyze cash flow statements, you can make better, more informed decisions, regardless of your position.
The reporting objectives of the statement of cash flows is to provide information about important cash inflows and outflows for business decision makers. It answers specific questions such as: (1) how does a company obtain its cash? (2) Where does a compay spend its cash? (3)What is the change in the cash balance?
The Statement of Cash Flows Reports cash inflows and outflows in three broad categories: 1) Operating Activities, 2) Investing Activities, and 3) Financing activities. Together, these three cash flow categories explain the change in cash from the beginning balance to the ending balance on the balance sheet.
The cash flow statement shows all sources of cash and all of the uses of cash. Provides information about cash receipts (inflows) and cash payments (outflows).