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    Statement of cash flows

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    What is the purpose of the statement of cash flows? Why are statements of cash flow important when assessing the financial strenght of an organization?

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    Solution Preview

    In brief, the statement of cash flows tells us where our cash has been used. The statement shows how changes in balance sheet and income accounts affected cash and cash equivalents and breaks the analysis down according to operating, investing, and financing activities.

    I have broken it down in details below.

    The statement of cash flows is one of the four principal financial statements required by GAAP. The other three are:
    - Income Statement
    - Statement of Retained Earnings or Stockholders' Equity
    - Balance Sheet
    - Statement of Cash Flows

    Since ...

    Solution Summary

    This posting looks at cash flows, explains the importance of them, and assesses the importance with regards to the financial strength of an organization.