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Statement of Cash Flows Assignment Example | Topics and Well Written Essays - 250 words - 1

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Statement of Cash Flows - Assignment Example

Creditors can http://buy-an-essay511.mystrikingly.com/ also use this statement to establish the credit worthiness of a company within a particular period. A firm with a healthy cash flow is characterized by the cash generated from operating activities (Needles & Powers, 2013).
Even though income statements and balance sheets are used to establish a firm’s performance and heath (Harrison, Horngren, & Thomas, 2013), it is still imperative that firms prepare the statement of cash flow. For instance, shareholders need the statement of cash flows to check the adequacy of cash flow as a sign of the firm’s ability to pay dividends and expand its operations. Cash flow statement is used for short and long-term financial planning since it explains the reasons for a deficit or surplus in a firm’s liquidity position at the end of a particular period (Harrison, Horngren, & Thomas, 2013). Furthermore, a cash flow statement is mainly based on the actual cash concept; thus it is a critical tool for liquidity analysis of a company (Rich, Jones, Mowen, & Hansen, 2013).