Question

“The Slater & Gordon case is proof that the Cash Flow Statements is the only part of the financial statement that provides an early warning sign of the company’s financial trouble.”

Required:

Do you agree or disagree with the statement above? Using the AREA framework, respond to this statement and give your reasons why. Cite examples to support your response.

ANALYSE: (30-50 words): Identify the issue and why it matters. Determine what you need to find out.

RESEARCH: (200-250 words): Present relevant facts and evidence, or issues.

EVALUATE & ANSWER: (200-250 words): Provide your opinion of the themes or issues you have identified, justified by the evidence you have gathered and evaluated.

Answer 1

1. I abolutaly agree with this statement as finance is the key of any bussiness. Without generation cash it is just useless to do the bussiness.

Analyses: cash flow statement consist of operating investing and financing activity. It is important to know that bussiness should generate cash and from which activity. It is very important that it should generate cash from operating activity.

Research : cash flow statement describe the sources from where the cash is being generated and where it being invested. It is important for company to research the cashflow statement to determine the inflow and outflow of cash. If the bussiness is earning huge profits and generating negative cash flow from operating activity it is a not a good sign for bussiness as it is not generating cash irrespective of making profits. As per my view it is totally useless to make profit if you cant realise it in cash.

Evalute: if the bussiness not able to generate cash soon it will come to end as cash is not being generated.so profits and cash flow both are important but only making profit and realising it is not worth.