Question

Which of the following statements about the two alternative methods that may be used when preparing the statement of cash flows are true?
a. Income statement
b. Balance sheet
c. Prospectus
d. Financial statement notes
e. Company news releases
f. Statement of cash flows
g. Stock price information and analysis
h. Statement of shareholders' equity
i. Management discussion and analysis of financial performance

Answer 1

Answer:

The following records won't be required in drawing up a cash flow statement:

a. Income statement (True)

b. Balance sheet (True)

c. Prospectus (False)

d. Financial statement notes (True)

e. Company news releases (False)

f. Statement of cash flows (True)

g. Stock price information and analysis (False)

h. Statement of shareholders' equity (True)

i. Management discussion and analysis of financial performance (False)

Explanation:

A cash flow statement is an element of the financial statement which helps investors identify the liquidity of the business.

It reveals in great details the sources and uses of the cash resources of the business, and gives true indication to the internal workings of management in wealth creation for the shareholders

Since its only concerned about the cash uses and sourcing, it means not all financial record of the business will be essential in drawing up a statement of cash flow.