Financial Statements Analysis : Cash Flow

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Introduction The financial statements analysis is very important to various users because it helps to express the overall financial health of the organization (Megan, Hategan, Caciuc, & Cotlet, 2009). Managers use the cash flow statements to determine the cash generated by the operating, investing and financing activities (Gibson, 2013). The statement of cash flow is a step by step presentation of cash inflows and out flows from the company’s operating, investing and financing activities, more so the statement demonstrates liquidity of an organization (Öztürk, 2015). The cash flow statement should report all transactions that affect cash flow. Investors and creditors are interested in the cash flow statement because are able to determine how much capital should be raised for investment, or if the company is able to meet its debt and pay dividends (Gibson, 2013). If no actual cash changes hands in a particular transaction, then the Cash flow statement does not change. This study presents a comprehensive description of the components of the statement of cash flows, the two alternative methods used to present the statement of cash flow, and a comparison between two cash flow statements of two companies; Nike and Tech Data Corporation. Methods of the Cash Flow Statement Cash is the most important asset that a company may own, it is usually known to be in form of coins and notes (Foster III, Kevin McNelis, & Smith, 2012). The statement of cash flows was first introduced in 1987
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