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

Statement of Cash Flows - Assignment ExampleCreditors stool likewise 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 operational activities (Needles & Powers, 2013).Even though income statements and balance sheets are used to establish a firms writ of execution 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 suppress the adequacy of cash flow as a sign of the firms ability to fall in 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 firms liquidity position at the end of a particular period (Harrison, Horngren, & Thomas, 2013). Furthermore, a cash flow statement is mainly base on the actual cash concept thus i t is a critical tool for liquidity synopsis of a company (Rich, Jones, Mowen, & Hansen, 2013). Users of the companys annual financial reports can get a shine of the liquidity position of the company by looking at the statement of cash flows. This statement also helps in streamlining a companys internal financial management by providing information on the cash flow analysis of the company. Finally, the cash flow statement assists users of the annual financial report to psychoanalyze the relationship between profitability, profits and the net cash flows of the company for a particular period (Mohana,