Explain the purpose and the format of the statement of cash flows. Also, describe its relevance to decision-makers. The statement of cash flows
Explain the purpose and the format of the statement of cash flows. Also, describe its relevance to decision-makers.
The statement of cash flows is considered a major financial statement, along with the income statement, balance sheet, and statement of stockholders’ equity. However, cash flows provide much information and answer certain questions that the other three statements do not. It has replaced the statement of changes in financial position, and its presentation is required whenever an income statement is prepared.
The statement of cash flows shows the effect on cash and cash equivalents of a company’s operating, investing, and financing activities for an accounting period. Cash equivalents are short-term, highly liquid investments such as money market accounts, commercial paper (short-term notes), and U.S. Treasury bills. Short-term investments (marketable securities) are not considered cash equivalents.
References
Book
Brigham, E. F., & Ehrhardt, M. C. (2020). Financial management: theory & practice. Ed. 16. Boston (MA): Cengage Learning.
Articles:
0 – Mulford, C. (2005). A best practices approach to cash flow reporting: Implications for analysis: The national magazine of business fundamentals. Business Credit, 107(1), 24-28. Retrieved from https://search.proquest.com/trade-journals/best-pr…
1Brahmasrene, T., Strupeck, C. D., & Whitten, D. (2004). Examining preferences in cash flow statement format: Certified public accountant. The CPA Journal, 74(10), 58-60. Retrieved from https://search.proquest.com/scholarly-journals/examining-preferences-cash-flow-statement-format/docview/212294397/se-2?accountid=35796
2Sabau, L. I. (2012). Empirical Study Concerning The Views On The Format Of Cash Flow Statements. Timisoara: Tibiscus University in Timisoara, Faculty of Economics. Retrieved from https://search.proquest.com/conference-papers-proceedings/empirical-study-concerning-views-on-format-cash/docview/1398543951/se-2?accountid=35796
3- Brickner, D. R., & McCombs, G. B. (2004). Teaching the indirect method of the statement of cash flows in introductory financial accounting: A comprehensive, problem-based approach. Journal of Education for Business, 80(1), 41-46. Retrieved from https://search.proquest.com/scholarly-journals/teaching-indirect-method-statement-cash-flows/docview/202820186/se-2?accountid=35796
4- Goldwater, P. M., & Fogarty, T. J. (1995). Cash flow decision making and financial accounting presentation: A computerized experiment. Journal of Applied Business Research, 11(3), 16. Retrieved from https://search.proquest.com/scholarly-journals/cash-flow-decision-making-financial-accounting/docview/227551712/se-2?accountid=35796
5- Cory, S. N., Envick, B. R., & Patton, E. B. (2011). SOUND FINANCIAL DECISION MAKING FOR ENTREPRENEURS: CAN THE GAAP CASH FLOW STATEMENT MISLEAD? The Entrepreneurial Executive, 16, 63-69. Retrieved from https://search.proquest.com/scholarly-journals/sound-financial-decision-making-entrepreneurs-can/docview/885012381/se-2?accountid=35796
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