Submitted by: Submitted by louismprieto
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Words: 563
Pages: 3
Category: Business and Industry
Date Submitted: 11/28/2011 06:17 PM
Cash Flow Statement
ACC/421
When assessing the financial strength of an organization it is important for the assessor to look over the typical items such as balance sheets, income statements as well as income to debt ratios. With this being said statements of cash flows are often left out and mot looked over. The statement of cash flow allows the assessor to see information on how cash is used that unless the assessor was using this statement they would not know. The statement of cash flows gives the assessors look into how cash is being spent as well as where it is being replenished. With this in mind it is valuable for who ever will be assessing an organizations financial strength to familiarize themselves with the statements of cash flows so that they can properly do what is being asked of them.
In order for somebody to review a statement of cash flows they must understand what that statement is as well as what that statement does. The statement of cash flows is a statement that is used to show cash and where it is coming and going. The best way to describe this is that the statement of cash flows describes how changes in the balance sheet or changes in the income statement. The way this is done is by showing how cash was used to purchases equipment, pay debt, pay employees and do anything else that involves cash. This statement shows incoming cash as well as outgoing cash. This statement shows all transactions that were done using cash. This is gravely important for many investors because a company can appear to make income during a given period when in all reality the way they earned their cash was through selling of assets. This statement is very helpful in seeing the short term chances of success for a company. It does this by showing the amount of cash an organization will have in a given period to pay their liabilities. When deciding whether or not to invest in an organization knowing how they will pay for their liabilities is very important....