Identify sources of information for a statement of cash flows.

Expert Solution

Answer) A statement of cash flow helps to explain to investors where a company's cash comes from and how it is used, based on the three categories of income activities. Companies with large cash flow are most favored by investors as it indicates the financial stability.

Three main sources of information of cash flow are as follows:

Operating activities are the first major source of cash inflow and outflow, which includes normal activities of business, such as the sale of inventory or payments made to employees. Information on such source is being provided by the cash account and other financial statements of the company prepared at the end of the accounting period. operating activity is one of the largest of the three activities that make up a statement of cash flows.

The next and important source of cash inflow or outflow are investing activities, which refers to expenditures on business investments, such as new equipment or a new plot of land to use in construction. These activities support a company without contributing to the normal course of business. it includes the capital nature transactions whose information is mainly provided from the balance sheet prepared at end of the year.

The third and last important source of cash flow statement is financing activities. These represent the sources of finance available to business such as bank loans or stock sales.

ekkarill92 answered 1 year ago

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