Question

"Statement of Cash Flows"

A Statement of Cash Flows is often one of the least used and understood of the key Financial Statements. However, it is a critical report to use when evaluating or analyzing a company. Showing where a company is receiving and using its cash - through Operations, Investing, and Financing - this report can be used to help evaluate liquidity, solvency, and financial flexibility.

• Analyze the key sections of the Statement of Cash Flows: Cash from Operations, Cash from Investing, and Cash from Financing. Provide your opinion on the most important section for evaluation. Discuss the implications of a negative cash flow from any of the key sections.

Answer 1

The main aim of cash flow statement is to analyse the flow of cash which mean wheather cash is generated through regular business or sale of assets or through financing

cash flow from operations

this is the cash generated from regular business of company if there is a reasonable positive cash flow from operations we can interpret that business of the company is going good and it is receives cash from debtors regularly and paying creditors regularly

negitive flow from operations

Implications are negitive cash flow from operations means the company performance is detorating like bad credit management

investing activities

positive cash flow has two aspects

Investments are realised or fixed assets are sold

negitive flows

It expresses the growth of the company growth may be in the form of increase in assets and investment of surples funds

cash flow from financing activities

positive cash flow means that firm has either raised capital or debt it expresses the need of funds

negitive cash flow

Negitive cash flow indicates payment of interest or dividend or payment of debt or repurchase of shares it indicates that the company's growth is neutralised if the company is growing we will need additional funds