Chapter 11: Statement of Cash Flow Summary

Chapter 11 -
Statement of Cash flow

Role of the Statement of Cash flow

Purpose of Cash flow:
·
Provides information about
-> Cash Inflows (cash receipts)
Cash outflows (cash
payment)
->




representation of
company liquidity.
->




Cash flow displays how how cash used
company generances cash,
and uses much or

received.



Business Activities


Operating Activities:Operating the business to earn
profit

Activities: Buying
Investing Assets that are
used to
generate revere




Financing Activities:
Obtaining funds to start &
operate a business (from owners - creditors


Assessing company's ability
to
produce
future not cash inflow

·Cash is critical to success.
company
Goal of Sinancial information
helpful predicting
in
reporting, provide arounds, timing
and of future cash flows
uncertainty
·Cash inflow, outflow & net income allow better future Cash flow than new
income alone.
predicts

, Company's ability to

pay obligation
& dividends



Cash
importantreceipt
andpayment help
financial statement users are




supplies: pay for
goods
on time?

Employees ability pay everyone
-
to salacks and
fringe benefits.
lenders
·




investorsrepay inces
and
pay
=




for
Estimating need external
financing
Fundingcanbe generate from
internally generated funds or
external financingin



Net income is Cash flow

·Net income of from
differ
a
company, and their
generated each
operations may
Because not income doen't indicare the amount of cash
generated
from operations, however
of
alway flow into present, user
gain insight
into


quality a
reliability reported
income.