HELP PLEASE Business!!!!?
Explain the value of the statement of cash flows in analyzing cash flows. What are the three areas of cash flow (sources and uses of funds)? Why break it down into the three areas?12 months ago - 1 answers
Business finance and economics 101.
The point of a cash flow statement is for investors to know certain specifics of how the business is operating. What are its operating costs? Where is the income coming from? And where/to whom the cash is going out, say to vendors. Which is the reason it's broken down into 3 specific categories I just mentioned.
Operations - which is the actual costs of running the business. It includes Net earnings modified by any increases in payable taxes, any depreciation, inventory, and increases or decreases in accounts payable and recievable.
Investing - this refers to money spent on investing in the business future. Mostly stuff like buying new equipment.
Financing - includes cash in or out related to loans, debt and dividends. In other words, when capital is raised or dividends paid out.
As for why it's those 3 areas? It should be self explanatory.
As to why to analyze it? It can be used to project future flow of cash so you can budget accordingly and get a feel for the financial health of your business.
Source(s):12 months ago