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Cash Flows and relationship with income statement

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How is the Statement of Cash Flows interrelated with the income statement and balance sheet?

If you were a credit analyst, which financial ratios would be important to your decision making? Why?

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Accounting is the means by which information about an enterprise is communicated and, thus, is sometimes called the language of business. Costs, prices, sales volume, profits, and return on investment are all accounting measurements.

Financial Statements is designed primarily to assist investors and creditors in deciding where to place their scarce investment resources. It is also used to help management to know the performance of organization.

Financial statements are useful tools for evaluating both profitability and liquidity. Used separately, or in combination, the income statement and balance sheet help interested parties to measure a company's current financial performance, and to forecast its profit and cash flow potential. Accountants summarize this information in a balance sheet, income statement, and statement of cash flows.

The statement of cash flows provides information about cash receipts and cash payments of an entity during a period. A secondary objective is to provide information about the operating investing and financing activities of the entity during the period. We know a great deal about the company that is valuable in assessing its future cash flows information that is useful to investors, creditors, management, and others. Because the balance sheet, income statement, and statement of cash flows are derived from the same underlying financial information, they are said to "articulate," meaning that they relate closely to each other. Balance sheet, tells about the assets and ...

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This discusses the cash Flows and relationship with income statement

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