Cash Flows
Cash Flows paper
Cash flows are the flow of funds in and out of a company. The cash flows statement is one of four financials statements used by firms to report their financial position, including the balance sheet, income statement and statement of shareholders equity. The Cash flows statement is a statement that reports the flow of funds, the origin of the funds and how the funds are spent within a business. The cash flow statement can be recreated from information documented on the balance sheet and income statement. The cash flow statement’s usefulness extends to investigation of financial crimes to determine the beneficiary of firm monies. Equally as important is its use for “tracking the performance of a business” (The Motley Fool).
On the statement of cash flows negative figures represent expenditures or outflows from the business and positive figures are cash coming into the business. There are three major sections of information that make up the cash flow statement; operating activities, investing activities and finance activities. Operating activities provides the net cash from operating expenses based on the indirect or direct method. Indirect starts with net income and adjust for all non-cash income or expenses. The direct method starts with revenue and adds or subtracts cash expenses. Investing activities section reveals the cash spent on firm investments or cash acquired through investments. The financing activities section provides specifics on how the firm procures additional cash, shares cash with investors or repays debt.
Cumulatively, operating, investing and financing activities provide the net change in cash, which ties into the cash and cash equivalents on the balance sheet.
References
The Motley Fool Staff (Comp.). (n.d.). Cash Flow Statement. Retrieved from
Cash flows are the flow of funds in and out of a company. The cash flows statement is one of four financials statements used by firms to report their financial position, including the balance sheet, income statement and statement of shareholders equity. The Cash flows statement is a statement that reports the flow of funds, the origin of the funds and how the funds are spent within a business. The cash flow statement can be recreated from information documented on the balance sheet and income statement. The cash flow statement’s usefulness extends to investigation of financial crimes to determine the beneficiary of firm monies. Equally as important is its use for “tracking the performance of a business” (The Motley Fool).
On the statement of cash flows negative figures represent expenditures or outflows from the business and positive figures are cash coming into the business. There are three major sections of information that make up the cash flow statement; operating activities, investing activities and finance activities. Operating activities provides the net cash from operating expenses based on the indirect or direct method. Indirect starts with net income and adjust for all non-cash income or expenses. The direct method starts with revenue and adds or subtracts cash expenses. Investing activities section reveals the cash spent on firm investments or cash acquired through investments. The financing activities section provides specifics on how the firm procures additional cash, shares cash with investors or repays debt.
Cumulatively, operating, investing and financing activities provide the net change in cash, which ties into the cash and cash equivalents on the balance sheet.
References
The Motley Fool Staff (Comp.). (n.d.). Cash Flow Statement. Retrieved from
References: The Motley Fool Staff (Comp.). (n.d.). Cash Flow Statement. Retrieved from http://wiki.fool.com/Cash_flow_statement