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Cash Flow

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Cash Flow
RUNNING HEAD: CASH FLOW

Cash Flow Week 7/ Assignment Beverly Clarkson December 21, 2014 Daniel Carraher

RUNNING HEAD: CASH FLOW

Cash Flow A statement of cash flows is required by generally accepted accounting principles to be included in a complete set of financial statement. www.wiley.com Companies are required to prepare a statement of cash flow because it contains information for lenders and investors (external users). When a company uses the statement of cash flow it contains their annual reports that help to make decisions about the companies. The basis for cash flow analysis is presented in the statement of cash flow. It contains the actual cash a company generated and it shows how the company is able to operate and perform in the future.
There are three ways a company shows the way they consume and produce cash. The cash flow statement has three sections. The three ways are cash flows from operations, investing and financing. How the company gets its cash is the operations and financing. The investing section shows the way the company spends its cash.
Ratios would be used in the decision making process. One of the examples of the ratios is the operating cash flow ratio. This measures how current liabilities are covered by the cash flow generated by a company operation. A ratio that falls below 1.00 shows the company is not generating enough cash to meet current commitments. When a company falls below 1.00, it will have to find ways to fund its operations or slow their rate of spending in its cash. If the company has an
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