Statement of Cash Flows
#1 Statement of Cash Flows (Professor)
What does a statement of cash flows tell you about a company? Why is the statement of cash flows important? Can a company have profits but no cash? Why?
#2 Sections of the SOCF (Professor)
What is included in each section of the statement of cash flows? What does each section tell you about a company? Which of the three classifications of activities included on a statement of cash flows is the most important? Why?
#3 Statement of Cash Flows (Student Responses)
The statement of cash flows tells you how much cash went into and out of a company during a specific time frame such as a quarter or a year, some companies also do a monthly cash flow statement, The cash flow statement identifies the cash that is flowing in and out of the company. If a company is consistently generating more cash than it is using, the company will be able to increase its dividend, buy back some of its stock, reduce debt, or acquire another company. All of these are perceived to be good for stockholder value.
The company can have profits but no cash as company’s account most likely is on accrual basis, lots of sales may goes directly to Accounts Receivable, while AR is considered as current assets, the risk of bad debt or longer collection time could lead to the cash shortage of the company, one measurement would be for company to look at the net income vs. cash from operations, if net income is more than cash from operations, then there is the risk that the management need to address as this could turn to a much bigger problem.
Reference:
https://www.accountingcoach.
Solution preview for the order on statement of Cash Flows
APA
331 words