What is a statement of cash flows?

The cash flow statement is a financial statement that monitors changes in the balance sheet and how these changes affect the company's cash balance. In the United States, most companies use the accrual accounting method. This method records financial transactions in such a way that they occur, regardless of when cash changes hands between the parties involved in the transaction. The cash flow statement is used in the accrual accounting method to correct the lack of accurate reporting cash. Declaration of cash flows plays an important role in internal and external users of financial statements. The cash flow statement gives these users the opportunity to see how well the company generates cash and how much cash will be needed for future use. External users of financial statements include creditors, creditors, investors and shareholders. These individuals are interested in cash flows because onim can borrow or invest capital in business as a way to generate future revenues. Companies with negative cash toKY usually represent a bad investment because business operations cannot generate enough cash to pay for business operations, let alone future income for investors.

cash flow statement consists of three main sections: operational, investment and financial activities. Operating activities include normal activities that generate or spend cash for the company. Cash on sales sales, investment interest, dividends from investment in capital or securities, payments to dealers and payments to employees represent cash flows of operational activities.

Investment activities cash flows include the purchase of assets, loans to suppliers or customers and payments related to mergers or acquisitions. Asset purchases include land, equipment or buildings and equipment. Maller's sspolečnosti does not have to have many investment activities in a statement of cash streams because they usually don't have high capitalEight balances for investment.

Financial activities include cash inflows from investors, banks or shareholders. Cash outflows include payment of dividends for the company's shares and payments for long -term obligations or financing their own capital. Main loans or re -purchase of shares are examples of cash outflows. Companies can use two different styles to submit a statement of cash flows according to current accounting rules.

The direct method prepares an command by indicating all the main tides of cash. This method is the most common statement of cash flows used by companies. It represents a detailed and informative statement for internal and external financial users. The method of indirect cash flow begins by indicating the current net income and adjusting this number for all the influx and outflows of cash. This method is used to take a strict method of net profit and loss statement based on the method and loss and loss on the basis of cash.