STATEMENT OF CASH FLOWS 1
The Statement of Cash Flows is a very viable and helpful resource. Decision makers use the Statement of Cash Flows in many instances to assess the viability of a firm. Within the statement are many types of elements that are incorporated to create the complete Statement of Cash Flows. Also within the statement is what is known as the inflows and outflows. In some cases, activity notes may be incorporated to help complete such representations.
To fully understand the Statement of Cash Flows one must know the definition of it and what it in fact means. The Statement of Cash Flows is a change statement summarizing the transactions that caused cash to change during the period (Spiceland, 2007). In know this it is easier to understand why the Statement of Cash Flows and its purpose is to provide information about the cash receipts and cash disbursements of an enterprise that occurred during a period. Thus the statement will provide valuable information about the operating, investing, and financing activities that occurred during the period as well. Below is an example of a Statement of cash flows: STATEMENT OF CASH FLOWS 2
Just like the balance sheet and income statement, the Cash Flow Statement, or CFS, is a mandatory part of a company's financial reports. Since 1987, the CFS has mandatorily recorded the amounts of cash and cash equivalents entering and leaving a company. The CFS is also a viable source as it allows investors to understand how a company's operations are running, where its money is coming from, and how it is being spent. It is these resources that allow decision makers to assess the viability of a firm. Moving on to the elements of the Statement of Cash Flows there are several incorporated into the statement. Let’s start with the Structure of the CFS. First there is one important distinction with the CFS from the income statement and the...