Week 6 Stockholders Equity and Statement of Cash Flows Discussion Statement of Cash Flows graded The statement of cash flows is an important financial statement that is required to be released along with the income statement and balance sheet by every publicly traded company We did not have this requirement prior to the year 1988 Let s begin our discussion by asking this question When we already have the income statement and balance sheet to tell us about the financial performance and financial health of a company why was there a need to require companies to prepare a statement of cash flows Anybody Responses Responses are listed below in the following order response author and the date and time the response is posted Response Date Time Author W el co m e to w ee k 6 th re a de d di sc us si o ns Professor Wilson 3 11 2013 3 52 52 PM Class Let s get started with the 2nd thread for week 6 The statement of cash flows is an important financial statement that is required to be released along with the income statement and balance sheet by every publicly traded company We did not have this requirement prior to the year 1988 Let s begin our discussion by asking this question When we already have the income statement and balance sheet to tell us about the financial performance and financial health of a company why was there a need to require companies to prepare a statement of cash flows Anybody Prof Wilson Kristin Muchowski 4 7 2013 8 13 57 AM R E W el c o m e to w ee k 6 th re a d e d di sc u ss io n s After reading some information on stocks this weekend I found the following information The statement of cash flows tells you how much cash went into and out of a company during a specific time frame such as a quarter or a year The difference lies in a complex concept called accrual accounting Accrual accounting requires companies to record revenues and expenses when transactions occur not when cash is exchanged The statement of cash flows is very important to investors because it shows how much actual cash a company has generated The income statement on the other hand often includes noncash revenues or expenses which the statement of cash flows excludes R E W el c o m e t o w e e k 6 t h r e a d e d d is c u ss io n s David Neville 4 8 2013 9 20 00 AM Nice Kristin That was very well explained and helped me understand that the cash flow statement shows how much cash a company has on hand and is helpful in determining the true value of a company for future investors Kristin Muchowski 4 14 2013 8 30 16 AM R E W el c o m e t o w e e k 6 t h r e a d e d d is c u ss io n s I often find when broken down like this it gives me a better understanding glad it helped RE Welcome to week 6 threaded discussions Geri Waldbillig 4 7 2013 12 52 20 PM USEFULNESS OF THE STATEMENT OF CASH FLOWS The statement of cash flows reports the cash receipts and cash payments from operating investing and financing activities during a period in a format that reconciles the beginning and ending cash balances The information in a statement of cash flows helps investors creditors and others assess 1 The entity s ability to generate future cash flows By examining relationships between items in the statement of cash flows investors make predictions of the amounts timing and uncertainty of future cash flows better than they can from accrual basis data 2 The entity s ability to pay dividends and meet obligations If a company does not have adequate cash it cannot pay employees settle debts or pay dividends Employees creditors and stockholders should be particularly interested in this statement because it alone shows the flows of cash in a business 3 The reasons for the difference between net income and net cash provided used by operating activities Net income provides information on the success or failure of a business enterprise However some financial statement users are critical of accrual basis net income because it requires many estimates As a result users often challenge the reliability of the number Such is not the case with cash Many readers of the statement of cash flows want to know the reasons for the difference between net income and net cash provided by operating activities Then they can assess for themselves the reliability of the income number 4 The cash investing and financing transactions during the period By examining a company s investing and financing transactions a financial statement reader can better understand why assets and liabilities changed during the period Kimmel 624 625 Kimmel Financial Accounting 6th Edition John Wiley Sons vbk 9781118233634 outline 12 6 1 Elizabeth Smith 4 7 2013 3 35 31 PM R E W el c o m e to w ee k 6 th re a d e d di sc u ss io n s Here s the difference between each statement Income statement indicates the business profitability during a certain period Balance sheet a one time snapshot of company asset and liabilities Cash flow statement is like a checkbook reconciling the income and balance statement It records the transactions during the given period and ensures that the revenues are annotated and collected The cash flow statement concentrates on the revenue not the expenses http www investopedia com articles 01 110701 asp RE Welcome to week 6 threaded discussions Rachid Khalfaoui 4 7 2013 7 35 11 PM Pr Wilson and class All three statements Income balance sheet and cash flow use the same accounting information But each one has different function and different role The cash flow statement reports the movement of cash into and out of your business It includes the change in cash and cash equivalent from all sources The advantages of cash flow statement are numerous Gives information on inflow and outflow of cash to prevent cash shortage Informs investors and creditors about the financial health of the company Helps the company to know if it will be able to cover payroll and other urgent expenses Helps management to plan for future financial commitments Gives a tool for that provides warnings in advance of periods of high expenditure and low sales This helps have an accurate analysis on the firm s ability to meet its current liabilities Rachid This helps have an accurate analysis on the firm s ability to meet its current liabilities Rachid Makiko Kishida 4 8 2013 11 01 27 AM R E W el c o m e to w ee k 6 th re a d e d di sc u ss io n s Prof Wilson Class Bottom line the Income statement shows if the company made a profit or not during a certain period …
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