Question

Required information The purpose of the statement of cash flows is to report major cash receipts and cash payments related to operating, investing, or financing activities. Operating activities include transactions and events that determine net income. Investing activities include transactions and events that mainly affect long-term assets. Financing activities include transactions and events that mainly affect long-term liabilities and equity. Noncash investing and financing activities must be disclosed In either a note or a separate schedule to the statement of cash flows. Examples are the retirement of debt by issuing equity and the exchange of a note payable for plant assets.

Answer 1

Correct Answer:-

- What explains the changes in the cash Account ?

Mean change in cash and cash equivalents, That's result is the net increase (or decrease) in cash flow for the current period

- How can the company improves its operation?

Its determine the net cash income from operation, which help the management to take operative decisions and tells us how many cash are generated for every dollar of sales.

- Where does a company spends its cash? & How does a company receives its cash ?

The statement of cash flow shows how a company spends its money (cash outflows) and from where a company receives its money (cash inflows). The cash flow statement includes all cash inflows a company receives from its ongoing operations and external investment sources, as well as all cash outflows that pay for business activities and investments during a given period

Wrong Answer:-

- what are the changes in the non-cash accounts ?

As Cash flow does not provides the information for changes in Non-cash account,

A non-cash charge is a write-down or accounting expense that does not involve a cash payment. Depreciation, amortization, depletion, stock-based compensation, and asset impairments are common non-cash charges that reduce earnings but not cash flows.Non-cash charges are necessary for firms that use accrual basis accounting.

But, only need to disclose all significant non-cash investing and financing activities either at the bottom of the statement of cash flows as a footnote or in the notes to the financial statements