Statement of Cash Flows

A statement of cash flows is a financial statement that shows how much cash a company has generated and used during a specific period of time. It is one of the three main financial statements, along with the balance sheet and the income statement. The statement of cash flows is divided into three sections:

• Operating activities: This section shows the cash flows generated from the company's normal business activities, such as selling goods or services, collecting payments from customers, and paying expenses.
• Investing activities: This section shows the cash flows generated from the company's investments, such as buying or selling assets, and making or receiving loans.
• Financing activities: This section shows the cash flows generated from the company's financing activities, such as issuing or repaying debt, and issuing or buying back shares.

The statement of cash flows is a useful tool for investors and creditors because it provides information about how a company is generating and using cash. This information can be used to assess the company's financial health and its ability to meet its obligations. Here is a table that summarizes the three activities of the statement of cash flows:

Activity	Description
Operating activities	Cash flows generated from the company's normal business activities
Investing activities	Cash flows generated from the company's investments
Financing activities	Cash flows generated from the company's financing activities

The statement of cash flows can be prepared using either the direct method or the indirect method. The direct method shows the actual cash inflows and outflows from each of the three activities. The indirect method starts with the net income from the income statement and then adjusts it for non-cash items, such as depreciation and amortization. The statement of cash flows is a valuable tool for investors and creditors because it provides information about how a company is generating and using cash. This information can be used to assess the company's financial health and its ability to meet its obligations. Stack on the way on how achieve and balance your financial statements, help is here to ensure you understand the concepts at ease.

Sample Solution