A cash flow statement is a document that reports on cash flow movements in and out of an entity. This document shows how changes in balance sheet accounts affect cash and cash equivalents. This statement reflects an entities liquidity and provides a financial snapshot of an entities financial resources and obligations at a single point of time.
A cash flow statement has three segments
Operating activities included but is not limited to items such as production, sales and the delivery of an entities product. This is a key indicator measuring ability of the entities operation to generate enough cash flow to maintain operating capacity, make new investments and pay dividends.
Investing activities included but is not limited to items such as the purchase or sale of assets, loans to suppliers or customers, other payments. The separate disclosure of cash flow from investing is important because these cash flows represent the expenses incurred on resources intended to generate future income and cash flows.
Financing activities included but is not limited to items such as cash inflows from investors or cash outflows to shareholders. The separate disclosure of cash flow arising from financing activity is an important tool which predicts claims on future cash flow by providers of cash flow to an entity.
Thus a cash flow statement provides information that enables users to evaluate the changes in net assets inclusive of liquidity and solvency.
Please note: Prepared by Leigh Barker Accountant at MWC Group, Gordon and West Pennant Hills. Note that all content of this blog is general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstance.
A cash flow statement has three segments
- Cash flow from operations
- Cash flow from investing
- Cash flow from financing
Operating activities included but is not limited to items such as production, sales and the delivery of an entities product. This is a key indicator measuring ability of the entities operation to generate enough cash flow to maintain operating capacity, make new investments and pay dividends.
Investing activities included but is not limited to items such as the purchase or sale of assets, loans to suppliers or customers, other payments. The separate disclosure of cash flow from investing is important because these cash flows represent the expenses incurred on resources intended to generate future income and cash flows.
Financing activities included but is not limited to items such as cash inflows from investors or cash outflows to shareholders. The separate disclosure of cash flow arising from financing activity is an important tool which predicts claims on future cash flow by providers of cash flow to an entity.
Thus a cash flow statement provides information that enables users to evaluate the changes in net assets inclusive of liquidity and solvency.
Please note: Prepared by Leigh Barker Accountant at MWC Group, Gordon and West Pennant Hills. Note that all content of this blog is general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstance.
