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Cash Flow, Retained Earnings, and Balance Sheet

Cash flow classifications, retained earnings computation, and balance sheet

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Cash flow classifications
Cash flows can be classified into:

1. Operational cash flows: Cash received or expended as a result of the company's core business activities.
2. Investment cash flows: Cash received or expended through capital expenditure, investments or acquisitions.
3. Financing cash flows: Cash received or expended as a result of financial activities, such as receiving or paying loans, issuing or repurchasing stock, and paying dividends.

All three together are necessary to reconcile the beginning cash balance to the ending cash balance.

Retained earnings computation
Retained earnings refers to the portion of net income from a period, which is retained by the corporation rather than distributed to its owners. Similarly, if the corporation makes a loss for the period, then that loss is ...

Solution Summary

Cash flow, retained earnings and balance sheet are explained.