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In: Accounting

Financial statements all have a goal. The statement of cash flows does as well. Describe the...

Financial statements all have a goal. The statement of cash flows does as well. Describe the ways that the statement of cash flows helps investors and creditors make decisions about a company.

Be sure to answer in complete sentences, using proper sentence structure and grammar. You will need at least 4-5 sentences to answer this question completely.  

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Expert Solution

Cashflow Statement is a financial statement that summarises the cashflows coming into and going out from the corporation.

The purpose of statement of cashflows is to provide all the information about cash receipts and cash payments all at one place. These cashflows are divided into three categories.

1. Operating Cashflows : Deals with the cashflows relating to day to day operations

2. Investing Cashflows : Deals with the investment in assets, stocks etc

3. Financing Cashflows : Deals with the fund raising methods

Various stakeholders find the "Cashflow Statement" useful for different reasons. Shareholders view "Cashflow Statement" to find whether the corporation is generating positive cashflow to enable it to survive and pay dividends to them. Creditors (Lendors and Suppliers) view "Cashflow Statement" to know whether the corporation can pay its interest, dues payable, repayment of debts.

Thus the "Cashflow Statement" shows the cash surplus general during the year and hence shows the liquidity of the corporation.

ekkarill92 answered 1 year ago
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