Statement of Cashflow Research Paper_Crystal Estridge

.docx

School

National University College *

*We aren’t endorsed by this school

Course

410C

Subject

Management

Date

May 6, 2024

Type

docx

Pages

3

Uploaded by Babytay281 on coursehero.com

Statement of Cashflow Crystal Estridge Owning or running a business is an amazing experience in life. Learning the ends and outs of products and services sales can also be very challenging with laws, regulations, and environmental changes that occur quite often. So staying ahead on all the company financial reporting is vital for a successful business. There are 3 major financial statements a business needs to prepare and report to keep track of how the business is running. These 3 financial reports are the income statement, balance sheet, and the statement of cashflow. Each one includes important data and information for review and analysis by investors, auditors, owners, and management. All 3 of these reports intertwine with each other showing different areas of the business, for this paper I will be discussing the statement of cashflow. What is a statement of cash flow? The cashflow statement provides a detailed picture of all the incoming and outgoing cash for the business during specific accounting time periods. The report is broken down into 3 main sections which are Operating activities, Investing activities, and Financing activities. Operating activities section is where cash received or used as current revenues and expenses, Investing activities are where the purchasing and selling of assets will be shows as the cash value, and the Financing activities reflects the cash values for the debt and equity with the company, this usually shows borrowing and repaying loans from a bank. Also, Investing and financing transactions that do not require the use of cash or cash equivalents are excluded from a statement of cash flows but separately disclosed (IFRS, IAS7). These sections are broken down to shows how the cash flows based on short and long term, so reviewing and adjusting certain areas of the business can be easier to decide. How is it calculated and how to interpret it? The operating section of the statement can be prepared 2 different ways which are the direct method and indirect method. The direct method is calculated by taking all the cash collected in operating activities within the period and subtract all the cash disbursements. This method is considered to be simpler way of calculating this section but rarely used, the indirect method is the one most business will use which is calculated based on accrual entries and adjustments that recorded thew revenue and expenses at a different time period this in turn causes the operating activities to be different then the net income where as the direct method would match. The direct method is more consistent with the objective of a statement of cash flows "to provide information about cash receipts and cash payments - than the indirect method, which does not report operating cash receipts and payments" (FASB, 1987, par. 111) (Bassam, 2014). When reviewing a business’s statement of cashflow, it is important to understand what you are looking for and know the difference between a positive and a negative cash flow. Positive cash flow shows that the company has more money coming into the business than the money going out and its just the opposite for the negative cash flow where there is more money flowing out of the business than coming in. Having a positive cash flow does not necessarily
mean there is a profit. Negative cash flow should not automatically raise a   red flag   without further analysis. Poor cash flow is sometimes the result of a company’s decision to expand its business at a certain point in time, which would be a good thing for the future (Murphy, 2022 ). These cash flows can present an area within a company that needs to have adjustments made or where it can be thriving, have a healthy growth is the best way for a business to be successful. Healthy   growth   requires the business to react quickly to changing conditions and new opportunities. Healthy   cash flow   allows a company to grab exciting new opportunities, meet unexpected challenges and take the risks necessary to achieve positive-sum growth. Without these abilities, sustained, healthy growth simply isn’t possible (Smith, 2022). Importance of the cashflow statement? These financial statements are the best way to reflect and measure how a business is building for the future, whether it is profitable or needs help. The data presented allows many stakeholders the ability to decide if it’s a good investment and become apart of the company’s growth. Even auditors can use the insights uncovered by cash flow ratios to spotlight potential problem areas, thus helping them plan their audits more effectively (Mills, 1998). The statement of cash flow is one of the 3 combined statements that paints a clear picture of a business operations and presents the well-being of growth. Building up its stakeholders, investors, and providing great products and services to keep consumers and customers coming back is the primary goal for any business and having a healthy cashflow is the best way to achieve its goals.
Your preview ends here
Eager to read complete document? Join bartleby learn and gain access to the full version
  • Access to all documents
  • Unlimited textbook solutions
  • 24/7 expert homework help
Recommended textbooks for you
Text book image
Understanding Business
Management
ISBN:9781259929434
Author:William Nickels
Publisher:McGraw-Hill Education
Text book image
Management (14th Edition)
Management
ISBN:9780134527604
Author:Stephen P. Robbins, Mary A. Coulter
Publisher:PEARSON
Text book image
Spreadsheet Modeling & Decision Analysis: A Pract...
Management
ISBN:9781305947412
Author:Cliff Ragsdale
Publisher:Cengage Learning
Text book image
Management Information Systems: Managing The Digi...
Management
ISBN:9780135191798
Author:Kenneth C. Laudon, Jane P. Laudon
Publisher:PEARSON
Text book image
Business Essentials (12th Edition) (What's New in...
Management
ISBN:9780134728391
Author:Ronald J. Ebert, Ricky W. Griffin
Publisher:PEARSON
Text book image
Fundamentals of Management (10th Edition)
Management
ISBN:9780134237473
Author:Stephen P. Robbins, Mary A. Coulter, David A. De Cenzo
Publisher:PEARSON
SEE MORE TEXTBOOKS
Recommended textbooks for you
Text book image
Understanding Business
Management
ISBN:9781259929434
Author:William Nickels
Publisher:McGraw-Hill Education
Text book image
Management (14th Edition)
Management
ISBN:9780134527604
Author:Stephen P. Robbins, Mary A. Coulter
Publisher:PEARSON
Text book image
Spreadsheet Modeling & Decision Analysis: A Pract...
Management
ISBN:9781305947412
Author:Cliff Ragsdale
Publisher:Cengage Learning
Text book image
Management Information Systems: Managing The Digi...
Management
ISBN:9780135191798
Author:Kenneth C. Laudon, Jane P. Laudon
Publisher:PEARSON
Text book image
Business Essentials (12th Edition) (What's New in...
Management
ISBN:9780134728391
Author:Ronald J. Ebert, Ricky W. Griffin
Publisher:PEARSON
Text book image
Fundamentals of Management (10th Edition)
Management
ISBN:9780134237473
Author:Stephen P. Robbins, Mary A. Coulter, David A. De Cenzo
Publisher:PEARSON
SEE MORE TEXTBOOKS