02 Jun Do The Statement Of Cash Flows Discussion And Reply To Edward And Rhonda
The Statement of Cash Flows
Referencing this week’s readings and lecture, describe the following terms as they relate to the statement of cash flows: cash, operating activities, investing activities, and financing activities. What can creditors, investors, and other users glean from an analysis of the statement of cash flows?
Respond to at least two of your classmates’ posts.
Edwards:
Operating activities within a cash flow statement include a company’s business ventures that provide income which can be the money it made from selling their products and services and the money they have going to their expenses which is considered cash. Investing activities within a cash flow statement represent the money earned or lost in the stock market or from selling fixed assets which can include lending or collecting money from loans. Financing activities “account for external activities that allow a firm to raise capital. In addition to raising capital, financing activities also include repaying investors, adding or changing loans, or issuing more stock” (“Cash flow from financing activities”, 2018). All of these aspects are important within the cash flow statement because it shows a company where all their money went to and it helps to accurately prepare a financial statement.
An organization’s cash flow “can be spent in various activities, among them investing activities to help the company grow. Mergers or acquisitions, major improvements to existing buildings or upgrades to existing factories and equipment. Purchase or sale of marketable securities, property, plant, and equipment” (“Elements of a cash flow”, week 4 lecture). Banks use cash flow statements to determine if a company is worthy of a loan short and long term. Cash flow statements are vital to investors because it shows the amount of cash (net cash) a company has left after all transactions have been completed.
References
(2018). Elements of a cash flow. Retrieved from https://www.investopedia.com/terms/c/cashflowfromfinancing.asp
Elements of a cash flow. Week 4 lecture. Retrieved from https://ashford.instructure.com/courses/21789/pages/week-4-weekly-lecture
RHONDA:
The statement of cash flows shows how much money flowed in and out of a company during a reporting period. Managers should review the inflow and outflow on the statement of cash flows to notice if they have a cash flow problem (Epstein, 2014). Operating activities include activities that generate cash inflows from the sales of product or services. It also includes activities that generate cash outflows from payments to suppliers, employees, or other expenses. Investing activities include the amount of cash a company has spent on investments. It includes information about sales from long-term assets such as new equipment or if the company used cash to purchase long-term assets. It also provides information on cash the company spent on investing activities such as renovations or upgrades. Financing activities consists of activities that can change the value of a company’s shares. It also include activities the company uses to pay down debts.
The statement of cash flows provides creditors, investors, and other users with a more accurate picture of a business performance throughout the reporting period. It can help them identify cash flow problems and opportunities they can help a business improve its cash flow. The operating activities can provide them with analysis of how much cash a company has generated and how well cash is inflowing that can eventually benefit its shareholders.
Reference:
Epstein, L. (2014). Financial decision making: An introduction to financial reports [Electronic version]. Retrieved from https://content.ashford.edu/
WEEKLY RESOURCES:
Required Resources
Text
Epstein, L. (2014). Financial decision making: An introduction to financial reports [Electronic version]. Retrieved from https://content.ashford.edu/
- Chapter 4: Elements of a Statement of Cash Flows
Article
Ford Motor Company. (2014). Ford Motor Company 2012 annual report (Links to an external site.)Links to an external site.. Retrieved from http://corporate.ford.com/content/dam/corporate/en/investors/reports-and-filings/Annual%20Reports/2012-annual-report.pdf
Recommended Resources
Article
Heakal, R. (2010, May). What is a cash flow statement? (Links to an external site.)Links to an external site. Forbes. Retrieved from http://www.forbes.com/2010/05/27/cash-flow-statement-personal-finance-securities-analysis.html
Website
AccountingCoach. (2014). Cash flow statement (explanation) (Links to an external site.)Links to an external site.. Retrieved from http://www.accountingcoach.com/cash-flow-statement/explanation/1
- Read Parts 1 through 8
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