Cash Flow Statement
Cash Flow statement is a financial statement that shows the information on cash inflows a company receives from its operations, external investments and indicates the changes in income, assets, and liabilities. It measures the cash position and income of a company and its ability to pay off debts. When settling outstanding debts by the sale of bonds or shares, the cash flow statement includes this as additional information. The major purpose of the cash flow statement is to show periodic sources of an entity’s cash receivables and cash payables. It helps the company to budget and realize accounting revenues as it uses cash basis methods.
Questions:
- Why does an increase in accounts payables appear as an addition to the statement of cash flows?
- If a company pays outstanding debts by the sale of bonds or shares, should this be included in the statement of cash flows?