Question

Discuss the need for a "Statement of Cash Flows" when a company has a large Net Income.

Answer 1

Business is a matter of trade, the transaction between two or more parties, and the assets required to access the financial system are cash. Although a handful of industries are involved in the market more cash than others, no segment can survive for long. For a positive cash flow, the company needs to be cash flow longer.

The Company's financial statements include balance sheet, product statement and cash flow statement. The balance sheet provides a snapshot of the company's assets and liabilities. The income statement indicates the profitability of the business over a period of time. And the cash flow statement is a little different because it serves as a corporate checkbook that it appends to the other two statements.The cash flow statement records the cash flows of the business during the given period.

The bottom line on the cash flow statement represents the total change in the company's cash flows and its equivalents in the previous entire transaction.

Profit and cash flows are interrelated in the article. But they are not directly related. Profit is a way to keep a business going, while cash flow is a way to pay for business bills.

Generally, cash flows for a specific period are the amount of cash that is closed when the cash received is deducted. On the other hand, the profit is the same amount if you consider the profit, and the remaining amount after deducting the income earned, t is the cost to earn it.

Operating cash flow (OCF) is the barometer for making the right investment and investment in the life and business development of a business. Although investors are not paying attention to net income, operating cash flow is seen as a better metric for a business's financial life for two important reasons. For starters, dealing with cash flow under GAAP is no easier than just income. And on the other hand, what is known as "Cash is King" and a business that lacks long-lasting cash shortages is a death sentence.

But cash flows are not the ones that capture the change in working capital, but the true operating cash flows are the numbers captured in the statement of cash flows.

Accrued accounting is not only temporarily reporting business profits, but under GAAP it allows management several options to register each transaction. Given this flexibility, it also allows for revenue handling. Because managers usually book for a business in such a way that it helps them to earn their bonus, and it is always safe to remember that the product will outweigh the profits.