Please explain why the statement of cash flows does not provide a complete picture of a...

Please explain why the statement of cash flows does not provide a complete picture of a company's financial performance. What information does the statement of cash flows not provide? What additional information would be needed to provide a complete picture of a company's financial performance?

Expert Solution

The cash flow statement does not provide a comprehensive list of information which is a must to take critical decisions because there are numerous non-cash transactions besides cash transactions whose analysis is missing in cash flow statement.

Cash flow statement does not provide some of the following non-cash information:-

1. Credit sales

2. Credit purchases

3. Lawsuits filed against and for the company and their estimated liability and estimated collection.

4. Unclaimed warranty expenses.

5. Provision for bad debts.

In order to provide complete information, cash flow statements need to consider non-cash information also.

Hi mate,

I would be grateful to you if you can provide a thumbs up and write one beautiful comment. It will improve my rating and let me continue my journey here.

In case of doubt, please comment. I will consider myself fortunate if I can help you.

All the best for your bright future.

ekkarill92 answered 2 years ago

what entities are not required to provide a statement of cash flows? Explain why.

1.) The income statement and the statement of cash flows often paint the same picture of...

1.) The income statement and the statement of cash flows often paint the same picture of the company. True or False 2.) Investing and financing activities for the statement of cash flows may be prepared using the direct method Horizontal analysis compares a financial statement line item in the current year with the same line item in the prior year. True or False 3.) The statement of cash flows is an optional statement. True or False

1. Why is the Statement of Cash Flows useful? 2. What information does the Statement of...

1. Why is the Statement of Cash Flows useful? 2. What information does the Statement of Cash Flows provide you with? 3. Identify and discuss the three different types of activities that are reported on the Statement of Cash Flows.

Statement of Cash Flows The following items involve the cash flow activities of Rocky Horror Picture...

Statement of Cash Flows The following items involve the cash flow activities of Rocky Horror Picture Co.: Net income, $42,800 Payment of dividends, $16,000 Ten-year, $33,000 bonds payable were issued at face value Depreciation expense, $24,500 Building acquired at a cost of $33,400 Accounts receivable decreased by $3,600 Accounts payable decreased by $4,700 Equipment acquired at a cost of $8,000 Inventories increased by $5,800 Beginning cash balance, $17,700 Required: Prepare Rocky Horror Picture’s statement of cash flows using the indirect...

Statement of Cash Flows -- Troubleshooting Homework Why doesn't this balance? Please fix it. (There are...

Statement of Cash Flows -- Troubleshooting Homework Why doesn't this balance? Please fix it. (There are 7 mistakes.) End of Beginning Balance sheet year of year Change Income statement Cash 76,000 42,000 34,000 Sales Accounts receivable 116,000 107,000 9,000 Cost of goods sold Inventory 88,000 94,000 (6,000) Gross profit Total current assets 280,000 243,000 37,000 Operating expenses Equipment, at cost 280,000 210,000 70,000 Income from operations Less: Accum. depreciation (80,000)...

Complete the Sources and Uses classification and the Statement of Cash Flows for Florida Mining. Complete...

Complete the Sources and Uses classification and the Statement of Cash Flows for Florida Mining. Complete the Statement of Cash Flows on the following page. The firm’s Net Income for 2006 is $50M. Balance Sheet ($000) Florida Mining Assets Cash Marketable Securities Accounts Receivable Inventories Total Current Assets Gross Fixed Assets Less: Accumulated Depreciation Net Fixed Assets Total Assets Accounts Payable Notes Payable Accruals Total Current Liabilities L-T Debt Total Liabilities Common Stock (Par value) Paid-in...

Complete, in good form, an Income Statement, Balance Sheet, and Statement of Cash Flows for the...

Complete, in good form, an Income Statement, Balance Sheet, and Statement of Cash Flows for the following transactions. Transactions: T1 Company issues $200,000 of common stock @ $8.00 per share. T2 Company issues preferred stock @ 7% for $22 per share. T3 The company borrows on April 1st, 1 million dollars @ 7% interest rate T4 On June 1st, The company purchases 15 taxi cabs for $20,000, 5% salvage value, 5-year life T5 Revenue for the whole year was $600,000...

Please provide detailed answer for each category. Do not copy paste. The statement of Cash Flows...

Please provide detailed answer for each category. Do not copy paste. The statement of Cash Flows has three categories, Operating, Investing, and Financing. Write the importance of each category to a potential investor and why?

Prepare a complete statement of cash flows; report its cash flows from operating activities according to...

Prepare a complete statement of cash flows; report its cash flows from operating activities according to the direct method. Golden Corp., a merchandiser, recently completed its 2017 operations. For the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash payments for inventory, (5) Other Expenses are all cash expenses, and (6) any change in Income...

1) What is the purpose of Statement of Cash Flows? 2) Why do we need Statement of Cash Flows?

1) What is the purpose of Statement of Cash Flows? 2) Why do we need Statement of Cash Flows? 3)Statement of Cash Flows tracks net changes in cash flow. Transactions are grouped into 3 categories, Operating, Financing and Investing. Provide one sample transaction for Financial Activity Cash Inflow. (i.e. borrow $5000 from the bank) Provide one sample transaction for Investing Activity Cash Outflow. (i.e. purchase a truck) 4) Companies prefer the Indirect Method for Operating activity. What is the...

Question