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Cashflows The Cash Flow Statement Is A Essay

Cashflows The cash flow statement is a critical tool for financial planners and analysts interested in assessing the health and wellness of a company from a financial and operational perspective. The statement of cash flows provides information about the cash payments received by a company during a defined period; the amount that should be received from cash receipts is also reported (Kieso, Weygandt, & Warfield, 2007). This is critical information a company needs to determine how well their products and services are doing. The cash flow information assesses whether products and services are bringing in revenues for the company. Cash flow does not includes revenues coming in as interest or credit however, for the month the receipt is issued say for the charge incurred, or when the loan is given. There is a system of checks and balances. The system in place is highly organized to capture a big picture sense of how well a company is doing. Cash flows generally reflect an upward trend in cash flows, provided a company does well as one expects; many business however, take some times before they realize a positive cash flow. This is normal.

Other information a company can gather from cash flows includes the "operating, investing, and financing activities" during a defined period; allowing a company to reconcile the amount of cash it receives from the beginning of the period an accountant...

Having this information is valuable for many reasons. It allows a company to determine how much cash it will have available in the future; the company can estimate how much cash it may have and predict when that cash may be available. Most companies project what their cash flow will be from the time they begin offering a product or service, for defined periods of time. For example, a company may project how much their cash flow will be for five-year intervals starting from the time they offer a product or service for the next 10, 15 and twenty years out.
Sometimes receipts from credit transactions do not result in immediate cash; this is one reason why calculating cash flows is important. Knowing how much cash flow is available is important so a company can pay important debts, employees and pay for supplies important for conducting business. Other reasons for knowing cash flow include financing certain transactions including operating expenses, or investing in assets the company may need or require to conduct business. If a company is in the business of providing loans to others, it can only do so by knowing what its cash flows are from month to month, or it may realize a negative cash flow by lending too much money at any period of time. Cash flows originate from the sale of services and goods, or from the…

Sources used in this document:
References:

Kieso, D.E., Weygandt, J.J., & Warfield, T.D. (2007). Intermediate accounting (12th ed.). Hoboken, NJ: John Wiley & Sons.

Glantz, M. & Mun, J. (2011). Cash Flow Analysis. Credit Engineering for Bankers 2nd Ed. Pp. 99-128.

Wilkins, MS. & Loudder, M.L. (2000 Spring). Articulation in cash flow statements: A resource for financial accounting courses. Journal of Accounting Education. 18(2): 115-126.
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