Statement of Cash Flows
- Tags
- finance
summarises information about the cash inflows (receipts) and outflows (payments)
for a specific period of time.
It should [see page 52, answer]:
- Operating activities: Where did cash come from?
- Investing activities: What was the cash used for?
- Financing activities: What was the change in cash balance?
Basically summarise [see page 53, the flow of cash].
Note: profit does not equal cash.
Profit reflects the actual performance (how profitable each product is) based in the [see page 49, accruals (matching) principle]. Expenses are compared against the revenues they help generate.
Cash is king, meaning you need cash to pay your stakeholders and sustain your
business. Even if you don't make much profit for a long time, so long as you have
good cash inflow you can sustain yourself.