Cash Flow Statement

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Cash flow statement is one of the most useful statements of a company. Preparing and analyzing the cash flow statement is an essential work for the company. The cash flow statement demonstrates the cash flow of the company. Cash flow is important to the company, because it is the blood of a company. The normal activities, such as purchasing supplies with cash, paying employees with cash, and selling inventory in cash, will be shown by cash flow. Since the cash flow statement can indicate the cash flow, managers need to prepare and analyze the cash flow statement. Therefore, before I analyze the company’s cash flow, I will analyze and explain all the components in cash flow statement. What is Cash Flow? For example, when a family goes to a restaurant to have dinner, at the end, the father extracts fifty dollar out of his wallet to pay the bill. That is cash outflow of the family. The professional definition from is, “Cash flow is the difference in amount of cash available at the beginning of a period (opening balance) and the amount at the end of that period (closing balance). It is called positive if the closing balance is higher than the opening balance, otherwise called negative.” (Cash Flow. 2013) In other word, cash flow is the movement of the cash. The cash flow will increase by receiving cash from outside, and it will decrease by spending cash to outside. The cash flow statement indicates the results in terms of cash in and out of the business. The statement contains three components – operating activities, investing activities, and financing activities. Operating activities is the first part of the statement. It is the cash inflows and outflows of business related to the normal operations, which include the daily expenses and revenues of a company. The working capital items – current assets and current liabilities, are in the operating

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