![]() This includes the cash received from customers, cash paid to suppliers, salaries paid to employees, and other operating expenses. The direct method involves tracking all cash inflows and outflows from operating activities and presenting them in a cash flow statement. There are two main methods of preparing a cash flow statement: the direct method and the indirect method. This can lead to better financial performance and increased profitability. Improves Cash Management: A cash flow statement helps businesses improve their cash management by identifying areas where cash inflows can be increased or cash outflows can be reduced. It provides insights into the company’s performance over a while, allowing you to identify trends and make informed decisions. Monitors Business Performance: By analyzing a company’s cash flow statement, you can determine its operational efficiency, profitability, and liquidity. For example, by analyzing the cash flow statement, business owners can determine the feasibility of capital expenditures or decide whether to pursue new investments or financing opportunities. Helps in Decision Making: The cash flow statement can also help business owners to make important financial decisions. By understanding the cash inflows and outflows of a company, investors can determine if a business has enough cash on hand to pay its debts and fund its operations. Provides a Clear Picture of a Business’s Financial Health: The cash flow statement helps business owners and investors to evaluate the liquidity of a business. Here are some benefits of a cash flow statement: By analyzing cash flows, investors and creditors can assess a company’s ability to generate cash and meet its financial obligations. Benefits of Cash Flow StatementĪ cash flow statement is an essential financial statement that provides information on a company’s cash inflows and outflows. This includes cash received from issuing stocks or bonds or borrowing money, as well as cash paid for repurchasing stocks or paying off loans. Financing activities: This section shows the cash inflows and outflows related to the company’s financing. This includes cash spent on purchasing or selling property, plant, equipment, or other long-term investments.ģ. Investing activities: This section shows the cash inflows and outflows related to the company’s investments. This includes cash received from customers, payments made to suppliers and employees, and taxes paid.Ģ. ![]() Operating activities: This section shows the cash inflows and outflows related to the company’s core business operations. The cash flow statement is divided into three sections:ġ. It provides a summary of the company’s cash transactions, including its operating, investing, and financing activities. The cash flow statement is divided into three sections:Ī cash flow statement is a financial statement that shows the inflows and outflows of cash and cash equivalents for a business over a specific period, usually a year.Feedback Check My Work Set up T-accounts to determine activity in the furniture account. Use a minus sign to indicate negative cash flows (outflows). ![]() Orlando also reported a $1,700 gain on the sale of long- term investments Required: Compute net cash flow from investing activities. ![]() ![]() reported the following information: Furniture $46,000 $32,000 Accumulated depreciation 15,900 12,500 Investment (long-term) 38,000 50,000 In addition, Orlando sold furniture costing $13,400 with accumulated depreciation of $10,050 for $3,890. Use a minus sign to indicate negative cash flows (outflows) X Feedback Check My Work Set up T-accounts to determine activity in the furniture account Recreate the journal entry to determine the cash flow related to the long-term investment accountīrief Exercise 11-30 (Algorithmic) Determining Net Cash Flow from Investing Activities Orlando Inc. Required: Compute net cash flow from investing activities. Orlando also reported a $1,700 gain on the sale of longa term investments. reported the following information: Furniture $46,000 15,900 Accumulated depreciation Investment (long-term) $32,000 12,500 38,000 50,000 In addition, Orlando sold furniture costing $13,400 with accumulated depreciation of $10,050 for $3,890. Brief Exercise 11-30 (Algorithmic) Determining Net Cash Flow from Investing Activities Orlando Inc. ![]()
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