Statement of Cash Flows
The statement of cash flows is a relatively new financial statement in comparison to the income statement or the balance sheet. This may explain why there are not as many well-established financial ratios associated with the statement of cash flows.
We will use the following cash flow statement for Example Corporation to illustrate a limited financial statement analysis:
The cash flow from operating activities section of the statement of cash flows is also used by some analysts to assess the quality of a company's earnings. For a company's earnings to be of "quality" the amount of cash flow from operating activities must be consistently greater than the company's net income. The reason is that under accrual accounting, various estimates and assumptions are made regarding both revenues and expenses. When it comes to cash, however, the money is either in the bank or it isn't.
To learn more about the statement of cash flows, go to:
- Explanation of Cash Flow Statement
- Quiz for Cash Flow Statement
- Crossword Puzzle for Cash Flow Statement
Take Our Practice Quiz
We recommend that you now take our free Practice Quiz for this topic so that you can...
- See what you know
- See what you don't know
- Deepen your understanding
- Improve your retention
Note: You can receive instant access to our PRO materials (visual tutorials, flashcards, quick tests, quick tests with coaching, cheat sheets, video seminars, bookkeeping and managerial guides, business forms, printable PDF files, and progress tracking) when you join AccountingCoach PRO.
You should consider our materials to be an introduction to selected accounting and bookkeeping topics, and realize that some complexities (including differences between financial statement reporting and income tax reporting) are not presented. Therefore, always consult with accounting and tax professionals for assistance with your specific circumstances.