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- Using an example, explain in your own words the function of a statement of cash flows. Why is it prepared? What does it communicate to the reader of financial statements? What is its advantage over a balance sheet? over an income statement?
- Why are financing and investing activities of a corporation important to financial statement readers?
- How does an increase in accounts receivable during the year affect the cash flow from operating activities?
- Is a statement of cash flows really only a summary of cash receipts and disbursements recorded in the corporation’s Cash account?
- What effect does the declaration of a cash dividend have on cash flow? the payment of a dividend declared and paid during the current year? the payment of a dividend declared in the preceding year?
- Why may a change in the short-term investments account not affect the amount of cash provided by operations?
- Why is it possible that cash may have decreased during the year, even though there has been a substantial net income during the same period?
- Describe common transactions affecting balance sheet accounts that use cash. Explain how these items are analysed to identify cash flows that have occurred during the year.
- How is the cash flow table method used to prepare a SCF?
- What is the basic format of a SCF? Prepare a model format.
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