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ACC 557 Week 9 DQ 2 Use of Cash Flows Statements

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ACC 557 Week 9 DQ 2 Use of Cash Flows Statements
Week 9_DQ 2 Use of Cash Flows Statements
Assess what information may be revealed about the sustainability of a company by review
and analysis of a company’s statement of cash ows that may not be revealed in the balance sheet
or income statement. Provide support for your rationale.
Create an argument indicating that the statement of cash ows contains the most valuable
information related to a company’s performance for users of nancial statement information.
Provide support for your argument.
Cash flow can be broadly defined as cash inflow net of cash outflow, Investment in Fixed Assets, funds
raised during the year etc. Cash flow statement comprises of three parts which are as follows:-
Cash flow from operations
Cash flow from investing activities
Cash flow from financing activities
Cash flow can be broadly defined as cash inflow net of cash outflow. “Cash is king”, “Cash is lifeblood
of the business” these are few phrases used in the financial markets to represent the importance of cash
flow in the business, even the listing agreement of stock exchange’s which are signed by the companies
in order to get their stock listed includes a condition that company should also provide cash flow
statement to its investors with its annual statements which means it is compulsory for every listed entity
to prepare cash flow statement. It is not only out of compulsion that companies prepare cash flow
statement but it is also beneficial for the companies to prepare cash flow statements because it helps
companies to analyze various things such as difference between net profit and cash flow from
operations, increase in inventory which may represent production of slow moving inventory in
abundance etc.

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