Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

13. Statement of Cash Flows

Introduction to the Statement of Cash Flows

Financial Accounting

13. Statement of Cash Flows

Introduction to the Statement of Cash Flows

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Multiple Choice

Which of the following is an advantage of preparing a statement of cash flows?

It eliminates the need for an income statement.

It helps users assess a company's ability to generate future cash flows.

It replaces the balance sheet as the primary financial statement.

It records revenues and expenses on an accrual basis.

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Verified step by step guidance

Understand the purpose of a statement of cash flows: It provides information about a company's cash inflows and outflows during a specific period, helping users assess liquidity, solvency, and financial flexibility.

Recognize that the statement of cash flows complements, rather than replaces, other financial statements like the income statement and balance sheet. It focuses on cash transactions rather than accrual-based accounting.

Identify the key advantage of the statement of cash flows: It helps users evaluate a company's ability to generate future cash flows by analyzing past cash flow patterns and trends.

Eliminate incorrect options: The statement of cash flows does not eliminate the need for an income statement, replace the balance sheet, or record revenues and expenses on an accrual basis.

Conclude that the correct answer is: 'It helps users assess a company's ability to generate future cash flows,' as this aligns with the primary purpose of the statement of cash flows.