Cash Flow Statements questions and answers

what is a statement of cash flow? - it outlines cash flows through the business and how they were generated - this enables users to assess the availability of the business to generate a positive cash flow, service debts, fund desired expansions or changes why do you need to examine all general purpose statements? you need to look at all three different reports together so you can form a complete financial picture of the business and make well informed decisions Brainpower Read More differences between cash flow statement and income statement 1. cash flow statements are related to all elements of accounting equations 2. income statement is only related to revenue and expenses 3. statement of cash flows only deals with cash decisions a manager may make based on cash flow statement - where to reduce cash outflows - ensure that a satisfactory level of liquid funds is maintained at all times - increase mark up on products - owner could reduce drawings - purchase non current assets with capital instead of a loan - cut back staff/wages operating activities refers to cash flows that result from the provision of goods and services in the day to day business operations of a firm investing activities refers to cash flows that result from purchase or sale of non current assets financing activities refers to cash flows that have occurred as a result of changes in a firms financial structure examples of operating activities inflows: - selling goods for cash - collections from debtors - commission received - interest received outflows: - purchasing goods for cash - payments to creditors - expenses paid