Topic_5_Cash_Flow_Statement_Flashcards
(10 cards)
What is the purpose of the statement of cash flows?
To explain how cash changed over a period and why.
What are the 3 sections of a cash flow statement?
Operating, Investing, and Financing.
What is the most commonly used method to prepare the statement of cash flows?
The Indirect Method.
Why is cash flow from operations considered the “bottom line”?
It shows the cash-generating ability of the company’s core business.
What are common investing activities?
Purchase/sale of equipment, land, investments.
What are common financing activities?
Borrowing/repaying debt, issuing stock, paying dividends.
What is a pro forma statement of cash flows?
A forecast used to evaluate the feasibility of future plans.
Why might a company show positive net income but negative cash flow?
Non-cash items inflate income or receivables delay cash inflows.
What makes the cash flow statement different from the income statement?
It shows actual cash movement, not just accounting earnings.
What insight does analyzing the cash flow statement offer? (In the eyes of an investor/banker)
It reveals a company’s ability to meet obligations and fund operations.
