Chapter 22: Statement of Cash Flows

What is the primary purpose of the Statement of Cash Flows?

Provide information about a company’s cash receipts and cash payments during a period.

True or False: The statement of cash flows reports cash receipts, cash payments, and net change in cash resulting from a company’s operating, investing, and financing activities during a period.

True

What does the Statement of Cash Flows help investors, creditors, and others assess?

• The entity’s ability to generate future cash flows.

• The entity’s ability to pay dividends and meet obligations.

• The reasons for the difference between net income and net cash flow from operating activities.

• The investing and financing transactions during the period.

General Guidelines for Operating Activities

Involves Income Statement Items

General Guidelines for Investing Activities

Involves cash flows from changes in investments and long-term asset items

General Guidelines for Financing Activities

Involves cash flows from changes in long-term liability and stockholders’ equity items

Operating, Investing, or Financing: Cash inflows from sales of goods or services

Operating

Operating, Investing, or Financing: Cash inflows from interest revenue from notes receivable

Operating