cash_flows.pdf - EM 501 Management Accounting and Engineering Economics Statement of Cash Flows ˙Ismail Serdar Bakal Middle East Technical University

cash_flows.pdf - EM 501 Management Accounting and...

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EM 501 Management Accounting and Engineering Economics Statement of Cash Flows ˙ Ismail Serdar Bakal Middle East Technical University Department of Industrial Engineering (METU/IE) EM 501 Statement of Cash Flows 1 / 14
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Statement of Cash Flows Balance Sheet and Income Statement provide only limited information about company’s cash flows (receipts and payments) Comparative Balance Sheet increase in property, plant, equipment during the year do not show how additions are financed Income Statement shows net income do not indicate the cash generated by the operating activities Statement of Cash Flows explains the net increase (decrease) in cash for the corporation during the accounting period reports net change in cash resulting from operating investing financing activities. (METU/IE) EM 501 Statement of Cash Flows 2 / 14
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Statement of Cash Flows We may be interested in cash flow to answer vital questions such as: Where was money obtained? Where was money put and for what purpose? Is the company’s cash position sound and what effect will it have on the market price of the stock? How was the expansion in plant and equipment financed? Under accrual basis accounting net income will not generally indicate net cash flow from operating and other activities Statement of Cash Flows shows all the transactions affecting cash (METU/IE) EM 501 Statement of Cash Flows 3 / 14
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