ACCT.2.4.o.clock - ACCT 151 2nd 4 o'clock Chapter 5...

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ACCT 151 2 nd 4 o’clock Chapter 5: Statement of Cash Flows Statement of cash flows shows the changes in the cash account Statement of cash flows has three parts o Operating decisions/activities o Investing decisions/activities o Financing decisions/activities Over period of time (like income statement) Purposes: o Helps managers & investors understand the relationship between cash and net income o Cash balances can go down even if there’s positive net income o Able to figure out future cash flows o Able to realize if and when a company can pay interest, dividends and debts o Identifies specific increases and decreases in a firm’s productive assets Cash does not just mean currency and bank account balances, but rather also “cash equivalents” which are items that are very liquid, such as short-term investments – money market funds and treasury bills Activities that affect cash: o Operating – major day-to-day activities that generate revenues & expenses o Transactions that affect the purchase, processing and selling of a company’s products and services
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