Discuss the cash flow statement.

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Expert Solution

Cash flow statement is one of the important tools of cash management because it throws light on cash inflows and outflows of cash and cash equivalent.

A statement of changes in financial position on cash basis is commonly known as the cash flow statement. In other words cash flow statement summarizes the causes of changes in cash and cash equivalent position between dates of two balance sheet.

It indicates the inflow and outflow of cash

It divides business activities into three parts:

(1) Operating Activities

Operating activities are the principal revenue generating activities of the enterprises, it means business transactions relating to regular business activities such as purchase and sale of goods and services.

(2) Investing Activities

Investing activities refer to transactions that affect the purchase and sale of fixed asset and investments which are not included in cash equivalent

(3) Financing Activities

Financing activities are activities that result in change in the size and composition of the owner's capital and long term borrowing of the organization.

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ekkarill92 answered 1 year ago

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