Essay on Analysis of Cash Flow Statement

2319 Words Feb 6th, 2013 10 Pages
Analysis of Cash Flows Statements By Song Hanxiao
Pace University – New York Campus
MBA 640, 72052
Fall 2011
John Paul
Required Research Paper

Contents Abstract --------------------------------------------------------------------------------------------------------3 | I. Introduction of importance of Cash Flows statements -------------------------------------4 | II. Function of Cash Flow Statements -----------------------------------------------------------5 | III. Analysis of Cash Flow Statement ------------------------------------------------------------7 | 1. Analysis of Repayment Ability ----------------------------------------------------------7 | 2.
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And most of company’s cash comes from operating cash inflows. More inflows and fewer outflows can speed up cash turnover and increase the ability to defend all kinds of risks, which is prepared for emergencies. (2) Investing activities. Cash flow from investing activities reflects the situations of inflow and outflows related with company’s investment. For companies, they have to pay a great amount of cash into investment, which although gets good use of free cash but they have to undertake all kinds of investment risks. If corporations can get expected return, it will affect the company actively, or it will drive the company into worse financial situation. (3) Financing activities. Cash inflows from financing activities largely come from issuing equity and bonds and make loans, which reflect the company’s financing ability in the capital market and reflect company’s financial situation indirectly. Because before investors and creditors decide to invest, they have to consider the risks. So only those companies who have good financial situations will attract their eyes. Therefore, the more cash inflows from financing, the better financial situation and better future the company will have from the side, or the financial situation may deteriorate.
Therefore, cash flow statement reflects the situation of cash flow in one

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