A statement of cash flows is often one of the most used and least understood of the key financial statements.
Please respond to the following:
Explain how the net effect of cash in each activity in the cash flow statement is used in evaluating liquidity, solvency, and financial flexibility.
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Good evening everyone,
There are three types of cash flow. They are cash flow from operations, cash flow from investing and cash flow from financing. All are very important to the financial health of a company. Cash flow from operations are things that you pay to keep your business running from day to day. Cash flow from investing is more for long term (such as equipment). And cash flow from financing activities pertains to loan borrowing and repaying.
If you don’t keep your bills paid, loans up to date and make smart investments your company will negatively benefit from that. Looking at all of these things together along with your net cash is the best use of cash flow statements. Net cash on it’s own can come across as different things so it’s better to look at the big picture.
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