December 7, 2013
Cash flow statements are important for every business. Cash flow statements tell investors, banks, and the company’s management what is going on with the company’s cash. Investors want to know if a company can and if they have paid dividends and a cash flow statement can provide this kind of information. When banks look at giving a loan to a company they look at a lot of different statements and on of them is the cash flow statement. From a cash flow statement banks can determine if a company is handling there cash intake and out flow correctly. A cash ...view middle of the document...
Each section stands for the following; “Operating activities include the cash effects of transactions that create revenues and expenses. They thus enter into the determination of net income. Investing activities include (a) acquiring and disposing of investments and property, plant, and equipment, and (b) lending money and collecting the loans.
Financing activities include (a) obtaining cash from issuing debt and repaying the amounts borrowed, and (b) obtaining cash from stockholders, repurchasing shares, and paying dividends.”( Weygandt, J. J., Kimmel, P. D., & Kieso, D. E)
The operating activities show that a company is using their cash to make money and shows the company’s net income. Investing activities show that a company is investing back into the company by buying equipment and collecting on money owed to the company. Financing activities show that a company is paying dividends and paying loans acquired by the company on time.
All company should have a cash flow statement no matter how big or small the company is. Investors, banks, managers, and even the owners of a business need to a good cash flow statement to run a successful company.
Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2010). Financial accounting (7th ed.). Hoboken, NJ: John Wiley & Sons.