ACC 230 Week 5 DQ2 - 7390

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Discuss how the statement of cash flows is utilized by investors. If you were an investor reviewing a statement of cash flows, what section might interest you most? Why? Discuss the circumstances in which other sections of the statement might be important to an investor.

The cash flow statement indicates the company's incoming and outgoing cash.  The cash flow statement is important because it shows how the company is doing financially and if they are and will continue to be able to pay their expenses and buy needed supplies and assets.  The cash flow statement reflects whether the company is generating cash.  There are four parts to this statement: cash, operating activities, investing activities, and financing activities.  Investors use the cash flow statement as a tool in analyzing the company's financial status.  Is the company generating cash?  Is the company in trouble?

This statement indicates to investors how well the management is reviewing their statements and using the information to make better decisions.  The operating activities examine a company's cash from the net income or losses.  The investing activities reflect the cash from the investing activities. This cash is usually from sales, property and equipment. Financing activities reflects cash from selling stocks or borrowing from banks. If I were an investor I would think that all parts are of interest.  One can look at the operating activities and see cash from net income or losses but to be aware of what cash is coming from other activities like selling stocks and bonds, the investor would need to review the financing activities.  Just like reviewing all the financial statements is important, it is just as important to review all parts of the statements.

Solution Description

Discuss how the statement of cash flows is utilized by investors. If you were an investor reviewing a statement of cash flows, what section might interest you most? Why? Discuss the circumstances in which other sections of the statement might be important to an investor.