Statement of Cash Flows

Statement of Cash Flows - STATEMENT OF CASH FLOWS The...

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1 STATEMENT OF CASH FLOWS The Statement of Cash Flows (SCF) is one of the major financial statements presented in a company’s annual report. It is popular with investors because it shows the actual cash inflows and outflows, provides a clear picture of the company’s cash situation, and is fairly easy to interpret. It provides a good indication of the company’s ability to pay its bills on time. Preparation of the Statement of Cash Flows requires a solid understanding of how basic transactions are recorded and how they affect the financial statements. The SCF can provide information on: ability to pay bills and pay dividends the cash flow implications of financing and investing activities how much cash was generated from normal operating activities (sales, inventory purchases, payment of administrative costs) reasons why net income differs from net cash inflow The SCF shows the inflows and outflows of cash for the year. So the Statement of Cash Flows also explains the change in the cash balance from the beginning of the year to the end. The SCF is divided into what three categories: operating, investing, and financing. In addition to the three categories of cash flows that explain the change in cash balance for the year, major noncash investing and financing activities are shown in a separate section of the Statement. In order to prepare a Statement of Cash Flows you need to have the income statement for the year, comparative balance sheets showing the change in balance sheet accounts during the year, and some additional information. Look at each income statement account and related changes in balance sheet accounts, and compute the cash flow effect. After you are done with the income
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This note was uploaded on 02/03/2011 for the course MGA 201 taught by Professor Anderson during the Fall '08 term at SUNY Buffalo.

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Statement of Cash Flows - STATEMENT OF CASH FLOWS The...

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