Question

Forrest Gardner, owner of Gardner's Gardens, just completed his first year in business and has received financial statements that have been prepared by his accountant. Gardner finds the income statement and balance sheet to be informative, however, he does not understand the statement of cash flows. He says that the first section is especially confusing and does not understand why the income statement can't be used to get an understanding of cash flows from operating activities. Write a summary explaining the following: 1. Purpose and sections of the cash flow statement. 2. Explain why the first section may be confusing. Please review the attached grading rubric prior to completing the assignment. Rubric

Answer 1

Answer:  

1. A cash flow statement is utilized to comprehend the liquidity position of the association. A monetary record can tell the assets controlled by the organization and a pay explanation is valuable for anticipating the gain fullness of the organization, anyway a cash flow statement is to a great degree important to maintain the business easily.

The cash flow from activities area is important to comprehend the cash flow produced from the customary business of the organization.

The cash flow from speculation segment is important to comprehend the cash flow created from the ventures made by the organization.

The cash flow from financing area is important to comprehend the cash flow created from the financing exercises attempted by the organization.

2. The working segment of the organization may be a touch of befuddling as it is accommodates net income to the cash flow from working exercises utilizing relative information of current assets and liabilities between two years or utilizing the immediate strategy.

It very well may be hard to see, anyway it tends to be disentangled if the principle thought process is remembered i.e. deciding the money streams created from customary business.