Question

The purposes of the statement of cash flows are to A. predict future cash flows. B. evaluate management decisions. C. determine ability to pay debts and dividends. D. All of the above

Answer 1

Answer:

D. All of the above

Explanation:

A statement of cash flows is also known as cash flow statement and it is a financial statement which is used to illustrate how changes in income and various account of the balance sheet affect cash and cash equivalents.

The statement of cash flows is also used by financial experts or accountants to breakdown the cash-flow analysis into;

1. Cash-flow from operating activities: it represents cash-flow and transactions from operational business activities such as employee salary, sales of goods etc.

2. Cash-flow from investing activities: it represents the cash flow from investment such as proceeds from the sale of plant, equipments etc.

3. Cash-flow from financing activities: it represents the cash flow from debt or equity. Basically, the costs used in a financing a business.

The purposes of the statement of cash flows are to;

A. Predict future cash flows.

B. Evaluate management decisions.

C. Determine ability to pay debts and dividends.