BuyFind

College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
Publisher: Cengage Learning,
ISBN: 9781337794756
BuyFind

College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
Publisher: Cengage Learning,
ISBN: 9781337794756

Solutions

Chapter
Section
Chapter 6A, Problem 1RQ
Textbook Problem

Explain the purpose of the statement of cash flows.

Expert Solution
To determine

Explain the purposes of the statement of cash flows.

Explanation of Solution

Statement of cash flows: Statement of cash flow is a financial statement that shows the cash and cash equivalents of a company for a particular period of time. It shows the net changes in cash, by reporting the sources and uses of cash as a result of operating, investing, and financing activities of a company.

Purpose of the statement of cash flows:

  • The primary purpose of the statement of cash flows is to provide information about the cash inflows and cash outflows of an organization.
  • To determine the ability of the business to pay dividend and settle debts.
  • Statement of cash flows distinguishes among the operating activities, investing activities and financing activities.
  • Cash flows from operating activity provide information which is helpful in estimating future profitability, liquidity, and long term solvency.

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