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Name Statement of Cash Flow Practice Quiz Circle the letter of the best response. 1. Which of the following is correct in describing the statement of cash flows? A. The principal purpose of a statement

How to fill out statement of cash flow

How to fill out a statement of cash flow:

1. Start by gathering the necessary financial information. This includes the company's balance sheets, income statements, and any other relevant financial documents.
2. Identify and categorize cash inflows and outflows. This involves separating cash flows into operating activities, investing activities, and financing activities.
3. For operating activities, record any cash received from customers, cash paid to suppliers, and any other cash transactions related to the day-to-day operations of the business.
4. For investing activities, document any cash used for the acquisition or disposal of long-term assets, such as property, plant, and equipment or investments in other companies.
5. For financing activities, include cash flows related to raising or repaying capital. This can include cash received from issuing stocks or bonds, as well as cash used for dividends or loan repayments.
6. Calculate the net cash from each category of activities by summing up the cash inflows and outflows in each category.
7. Combine the net cash flows from all the activity categories to determine the overall change in cash for the period.
8. Finally, reconcile the change in cash with the opening and closing cash balances to ensure accuracy and completeness.

Who needs a statement of cash flow?

1. Business owners and shareholders: A statement of cash flow provides important information about a company's ability to generate and manage cash, which is crucial for assessing financial performance.
2. Investors and lenders: They use the statement of cash flow to evaluate the cash flow generation capabilities of a company and to assess its ability to meet debt obligations and provide a return on investment.
3. Financial analysts: They use the statement of cash flow to analyze the liquidity and profitability of a company, which helps in making investment decisions and forecasting future cash flows.
4. Creditors: Lenders and suppliers use the statement of cash flow to assess a company's ability to pay its debts and determine creditworthiness.
5. Regulatory authorities: Government agencies may require companies to prepare and submit a statement of cash flow as part of financial reporting regulations.

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