CA 23-5 1.) A statement of cash flows is a summary of all the cash receipts and cash payments of a business, for a specific period of time, such as a month or a year. Now, why would you want to watch this information, or monitor any changes? The purpose of the statement of cash flows is to provide an entry for the cash balance shown on your balance sheet. But, in essence, the statement of cash flows provides a business with so much more. An examination of the statement of cash flows will show you exactly where your cash surplus or deficit is coming from. 2.) The area of cash flows from operating activities is the meat and potatoes of the statement of cash flows. This area will show you if your sales, your cash receipts, and inventory and your accounts receivables are experiencing any dramatic changes, if your sales are to a great extent credit sales, and if your inventory is shrinking. A good manager or business owner will watch this area closely for suspicious changes, or abrupt changes. The area of cash flows from investing activities will provide you with a quick reference
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