Economics: Economics of Enterprise Economics of Enterprise Question #5970 from Lamarcus Streeter
Which of the following statements is CORRECT? a. The statement of cash flows reflects cash flows from operations, but it does not reflect the effects of buying or selling fixed assets. b. The statement of cash flows shows where the firm’s cash is located; indeed, it provides a listing of all banks and brokerage houses where cash is on deposit. c. The statement of cash flows reflects cash flows from continuing operations, but it does not reflect the effects of changes in working capital. d. The statement of cash flows reflects cash flows from operations and from borrowings, but it does not reflect cash obtained by selling new common stock. e. The statement of cash flows shows how much the firm’s cash--the total of currency, bank deposits, and short-term liquid securities (or cash equivalents)--increased or decreased during a given year.
Expert's answer
d. The
statement of cash flows reflects cash flows from operations and from borrowings,
but it does not reflect cash obtained by selling new common
stock.
In financial accounting,
a cash
flow statement,
also known as statement
of cash flows or funds
flow statement, is
a financial statement that
shows how changes in balance sheet accounts
and income affect cash and cash equivalents,
and breaks the analysis down to operating, investing, and financing activities.
Essentially, the cash flow statement is concerned with the flow of cash in and
cash out of the business. The statement captures both the current operating
results and the accompanying changes in the balance sheet. As
an analytical tool, the statement of cash flows is useful in determining the
short-term viability of a company, particularly its ability to pay bills.
International Accounting Standard 7 (IAS 7), is the International Accounting Standardthat
deals with cash flow statements.
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