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Chapter 2: 2-7DQ (page 46)

Explain why the statement of cash flows provides useful information that goes beyond income statement and balance sheet data.

Short Answer

Expert verified

The cash flow statement exhibits information beyond the income statement and the balance sheet. It provides a reconciliation between the opening balance of the cash and cash equivalent and the closing balance of the cash and cash equivalent over the reporting period.

Step by step solution

01

Financial statements 

Financial statements are described as the summary report of the organization’s financial position, performance, and cash flows.It is prepared by the management of the company at the end of the reporting period.

02

Cash flow statement 

A cash flow statement is prepared by an organization to show the movement of cash in the company.It is a component of the financial statements of the company. It is prepared to reconcile the cash and cash equivalent balance, which is impossible to do from the income statement and balance sheet alone.

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Most popular questions from this chapter

Indicate if there is an improvement or decline in total asset turnover, and based on the other ratios, indicate why this development has taken place.

If we divide users of ratios into short-term lenders, long-term lenders, and stockholders, which ratios would each group be most interested in, and forwhat reasons?

Assume the following data for Cable Corporation and Multi-Media Inc.

Capable corporation

Muli-media inc

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Sales

317,000

2,700,000

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402,000

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163,000

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having a higher return on stockholders’ equity than the other firm as

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9,000,000

Inventory

800,000

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