accounting cash flow statements

What is a cash flow statement

shows the cash inflows and outflows of a company for a period of time

what are is the purpose of cash flow statements

When used with other financial statements → can help people to
-assess the ability of a company generating net cash inflows from the sale of products or providing of services
-check the accuracy of past predictions of the cash generating ability of a company
-compare the cash generating ability of different companies
-assess the ability of a company to pay its debts

analysis of cash flow statement (operating activities)

A positive cash flow is a healthy indicator
(business cannot survive for the med-long term without positive operating activities)
-maybe paying too much for inventory or wages (lay off employees / find new supplier)

analysis of cash flow statement (investing activities)

Has business purchases ncas that can be used to generate income in the future (sensible business procedure) indicating healthy growth
- if business sold NCA to try and cover negative in operating (shows a negative indicator)
-business cannot survive without selling of ncas

analysis of cash flow statement (financial activities)

did business try to borrow money or raise more share capital to cover negative in operating activities? - negative indicator
(shares are only short term finance as business may have to pay more in dividends)
-did they use loans to buy ncas?
-is any dividend paid larger than net cash from operating?
→ shows excessive drawings