Statement of Cash Flows Assignment Example | Topics and Well Written Essays - 250 words - 1

Statement of Cash Flows - Assignment ExampleCreditors can also use this narrative to establish the credit worthiness of a company at heart a particular period. A firm with a healthy silver flow is characterized by the cash generated from operating activities (Needles & Powers, 2013).Even though income statements and balance sheets ar used to establish a firms performance and heath (Harrison, Horngren, & Thomas, 2013), it is still imperative that firms prepare the statement of cash flow. For instance, shareholders need the statement of cash flows to check the adequacy of cash flow as a sign of the firms ability to pay dividends and expand its operations. Cash flow statement is used for short and long-term financial planning since it explains the reasons for a deficit or surplus in a firms liquidity government agency at the end of a particular period (Harrison, Horngren, & Thomas, 2013). Furthermore, a cash flow statement is mainly based on the actual cash opinion thus it is a cr itical tool for liquidity analysis of a company (Rich, Jones, Mowen, & Hansen, 2013). Users of the companys annual financial motifs can get a glance of the liquidity position of the company by looking at the statement of cash flows. This statement also helps in streamlining a companys internal financial management by providing information on the cash flow analysis of the company. Finally, the cash flow statement assists users of the annual financial report to examine the relationship between profitability, profits and the net cash flows of the company for a particular period (Mohana,