The Purpose Of The Statement Of Cash Flows
Many decisions about the operations in business are made based on the financial statements of the business. The financial statements of the business provide the manager with a working picture of the financial health, profitability and performance of the business. It provides investors a snapshot and long-term picture of the business and guides many investment decisions in the business as well as helps to track performance by reviewing its financial statements including income statements, balance sheets, and statement of cash flows.
The Purpose of the Income Statement The purpose of the income statement is simply to show the profit or loss of a business operation over a specified accounting period such as quarterly or annually by tracking and documenting revenues generated and expenses incurred (Melicher & Norton, 2013). Selling, general and …show more content…
The Statement of Cash Flows The statement of cash flows provides a summary of the inflow and outflow of cash during a specified accounting period; it consist of three sections; operating activities, investing activities and financing activities. The operating activities are those cash flows related to the day-to-day operation of the business such as income or loss, increases or decreases in inventory, receivables, other assets, payables etc. Investment is the investment in businesses’ long term assets, acquisitions, sales of property and equipment etc. Financing activities are those cash flows related to creditors and investors and can include the issuance of capital stock, dividends paid, repurchase of capital stock etc. ("Cash flow," n.d.) Describe the three standard sections contained in a statement of cash flows.
Categories of Ratios Used in a Business Financial