Horti-Business Management (2+0)

Cash Flow Statement

• The nature of accrual accounting is such that a company may be profitable but nonetheless experience a shortfall in cash. The statement of cash flows is useful in evaluating a company's ability to pay its bills. For a given period, the cash flow statement provides the following information:
• Sources of cash
• Uses of cash
• Change in cash balance
• The cash flow statement represents an analysis of all of the transactions of the business, reporting where the firm obtained its cash and what it did with it. It breaks the sources and uses of cash into the following categories:
• Operating activities
• Investing activities
• Financing activities
• The information used to construct the cash flow statement comes from the beginning and ending balance sheets for the period and from the income statement for the period.