statement of cash flows

(noun)

a financial document that shows how changes in balance sheet accounts and income affect cash and cash equivalents, and breaks the analysis down to operating, investing, and financing activities

Related Terms

Examples of statement of cash flows in the following topics:

  • Introduction to the Statement of Cash Flows

    • The statement of cash flows show the company's ability to change cash flows in future circumstances.
    • The statement of cash flows is cash based and it shows the actual inflows and outflows of cash for the given month.
    • The cash flow statement includes only inflows and outflows of cash and cash equivalents.
    • The Statement of Cash Flows is composed of three sections:
    • The statement of cash flows shows the liquidity of a company.

  • Defining the Statement of Cash Flows

    • A statement of cash flows is a financial statement showing how changes in balance sheet accounts and income affect cash & cash equivalents.
    • In financial accounting, a cash flow statement, also known as statement of cash flows or funds flow statement, is a financial statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents, and breaks the analysis down to operating, investing, and financing activities.
    • Essentially, the cash flow statement is concerned with the flow of cash in and out of the business.
    • As an analytical tool, the statement of cash flows is useful in determining the short-term viability of a company, particularly its ability to pay bills.
    • Indicate the purpose of the statement of cash flows and what items affect the balance reported on the statement

  • Limitations of the Statement of Cash Flows

    • On its own, the statement of cash flows cannot be used to determine the financial position of a company.
    • As a cash flow statement is based on the cash basis of accounting, it ignores the basic accounting concept of accrual.
    • Cash flow statements are not suitable for judging the profitability of a firm, as non-cash charges are ignored while calculating cash flows from operating activities.
    • The statement of cash flows includes cash flows from operating, investing and financing activities.
    • Identify the factors that make the statement of cash flows of limited use

  • Comparing Statement of Cash Flows with the Income Statement

    • While the income statement focuses on a firm's profitability, the statement of cash flows focuses on a firm's solvency.
    • However, while the income statement focuses on profitability, the statement of cash flows focuses on solvency.
    • This situation is the reason behind the importance of the cash flow statement.
    • This is an example of a cash flow statement reflecting cash flows for the Municipality of San Narciso in the Philippines.
    • Describe how a company would use an income statement versus how they would use a statement of cash flows

  • Key Considerations for the Statement of Cash Flows

    • The statement of cash flows highlights the activities that directly and indirectly affect a company's overall cash balance.
    • A cash flow statement provides information beyond that available from other financial statements, such as the Income Statement and the Balance Sheet, through providing a reconciliation between the beginning and ending balances of cash and cash equivalents of a firm over a fiscal or accounting period.The main purpose of the statement, according to the Financial Accounting Standard Board (FASB) is to provide information about the changes of an entity's cash or cash equivalents in the accounting period .
    • It does not predict future cash flows.
    • The statement of cash flows lists all cash inflows and outflows during a reporting period from operating, investing and financing activities.
    • Summarize what items are represented on the statement of cash flows

  • The Imperative of Liquidity

    • Since cash flows are vital to a company's financial health, the statement of cash flows provides useful information to many stakeholders.
    • The main purpose of the statement of cash flows is to report on the cash receipts and cash disbursements of an entity during an accounting period.
    • Since cash flows are vital to a company's financial health, the statement of cash flows provides useful information to management, investors, creditors, and other interested parties.
    • Using the statement of cash flows, management may also recommend to the board of directors a reduction in dividends to conserve cash.
    • The information in a statement of cash flows assists investors, creditors, and others in assessing the following:

  • Components of the Statement of Cash Flows

    • In financial accounting, a cash flow statement, also known as statement of cash flows or funds flow statement, is a financial statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents, and breaks the analysis down to operating, investing, and financing activities.
    • Essentially, the cash flow statement is concerned with the flow of cash in and out of the business.
    • For businesses that use cash basis accounting, the cash flow statement and income statement provide the same information, since cash inflows are considered income and cash outflows consist of expense payments or other types of payments (i.e. asset purchases).
    • Statement of cash flows includes cash flows from operating, financing and investing activities.
    • Recognize how operating, investing and financing activities influence the statement of cash flows

  • Cash Flow from Financing

    • One of the three main components of the cash flow statement is cash flow from financing.
    • As is the case with operating and investing activities, not all financing activities impact the cash flow statement -- only those that involve the exchange of cash do.
    • However, because no cash changes hands, the discount does not appear on the cash flow statement.
    • Regardless, the cash flow statement is an important part of analyzing a company's financial health, but is not the whole story.
    • Distinguish financing activities that affect a company's cash flow statement from all of the business's other transactions

  • Interpreting Overall Cash Flow

    • In financial accounting, a cash flow statement (also known as statement of cash flows or funds flow statement) is a financial statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents.
    • The cash flow statement, as the name suggests, provides a picture of how much cash is flowing in and out of the business during the fiscal year.
    • When preparing the cash flow statement, one must analyze the balance sheet and income statement for the coinciding period.
    • An analyst looking at the cash flow statement will first care about whether the company has a net positive cash flow.
    • Explain the significance of each component of the Cash Flow Statement

  • Cash Flow from Operations

    • The operating cash flows refers to all cash flows that have to do with the actual operations of the business, such as selling products.
    • The operating cash flows component of the cash flow statement refers to all cash flows that have to do with the actual operations of the business.
    • Cash flows from operating activities can be calculated and disclosed on the cash flow statement using the direct or indirect method.
    • Just as with sales, salaries, and the purchase of supplies may appear on the income statement before appearing on the cash flow statement.
    • Distinguish events that would affect the operating section of the cash flow statement from all of the business's other transaction