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College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756

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BuyFindarrow_forward

College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756
Textbook Problem

Explain the purpose of the statement of cash flows.

To determine

Explain the purposes of the statement of cash flows.

Explanation

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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