ACC 291 Week 5 Discussion Questions and Responses Essay

DQ 2:  Why, and to whom, is the statement of cash flow useful? What is the most important section of the statement of cash flows for investors? Why?

The following questions relate to the statement of cash flows of a not-profit health care organization.

The statement of cash flows answers the following questions about cash: (a) Where did the cash come from during the period? (b) What

PepsiCo’s net income in 2004 was $4,212.00 or 14.3%, in 2005 the net income dropped by 1.8% bringing the net income to 12.5%. Both companies net income percentage decreased in 2005, though not by detrimental amounts it still is necessary to understand the financial status of both companies. Vertical analysis is a method of evaluating a company’s financial performance over a single accounting period, this helps to identify product items who’s sales may be increasing or decreasing at a faster rate than others, having the ability to perform this analysis throughout the year simplifies the process of product increase or decrease.

1) Which one of the following items is not generally used in preparing a statement of cash flows?

Learning Objective: 04-03 Present an income statement with earnings per share, statement of stockholders equity, balance sheet, and statement of cash flows.

The cash flow statement shows the amount of cash within a company. Items that affect the cash balance are listed on the statement. The first section of the cash flow statement is operating activities, which shows the cash flowing in and out of the company in relation to its business operation. The operating activities section also includes net income and the change in dollars of certain accounts listed on the balance sheet. The next section, investing activities, shows cash the company received and spent on a company's capital investments. The financing activities section shows the inflows and outflows of cash related to the company’s issued financial securities, which is also listed on the balance sheet and statement of shareholders' equity.

The cash flow statement of a company showcases how much money coming in to the business and out of business. A positive cash flow indicates a health business where more money coming in to business than going out of the business. There are three major component of cash flow statement which are operations, investing and financing activities. The balance sheet represents the financial position of the company for a specific date and provide company asset, liabilities and owner equity. The Income statement demonstrates how a company use its assets to generate income over a period of time. It explains the how the company generate revenue and what are their

The cash flow statement consists of three parts: cash flows provided by operating activities of $13,831, cash flows provided by investing activities, and cash flows provided by financing activities effect of exchange rate changes on cash and cash equivalents of ($204)

The “financial statements are formal reports providing information on a company's financial position, cash inflows and outflows, and the results of operations” (Hermanson, p.22). There are four main components that make up a financial statement. The four parts are, balance sheet, income statements, cash flow and, statement of owner’s equity. The balance sheets role is to define the company’s assets liabilities and revenue of the business. The income statement shows the income within the company. Cash flow reviews the position of the company by cash payments and receipts. Lastly, the statement of owner’s equity shows the amount of earnings, stock and other capitals of people in the company. (Hermanson, p.34-35).

If you believe in the old adage, "it takes money to make money," then you can grasp the essence of cash flow and what it means to a company. The statement of cash flows reveals how a company spends its money (cash outflows) and where the money comes from (cash inflows). (To read more about cash flow statements, see What Is A Cash Flow Statement?, Operating Cash Flow: Better Than Net Income? and The Essentials Of Cash Flow.)

One of the major distinctions in a cash flow statement, compared to income statement and balance sheet, is the lack of reporting on future incoming and outgoing cash. Furthermore, some of the things you won’t know in a loss and profit statement, but which feature at the cash flow statement include:

Before the availability of the cash flow statement the business firms suffered from the lack of the information that leaded to bankruptcy of those firms. The history of cash flow statement can be drawn back to the year 1863. In 1863 Dowlas Iron Company had recouped from a great business downfall, but the company had no enough cash to invest for new blast furnace, even though having made a profit. They had to clarify why they had no money to invest, the comparison

In an economic market place, business financial performance is essential to survival. Regardless of the organization’s composition and type, whether for-profit or not-for-profit, financial statements provide the necessary feedback concerning the firm’s performance. Although there are different types of financial statements, the basic and most common ones are the income statement, balance sheet, and statement of cash flows. The information provided on these formal records are of great importance to business managers, owners, and investors. Additionally, depending on the business, these financial statements can be much more complex in comparison to other organizations’ statements. The following paragraphs will discuss the purpose and major components of these three financial statements.

The statement of cash flows is being prepared in the firms, as because of it does not include accrual basis items. It is an overview of cash flow from operations, cash flow from investment activities and cash flow from financing activities