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This post addresses the statement of cash flows.

Why are companies required to prepare a statement of cash flows? Why is the statement of cash flows divided into three sections? What does each section tell you about a company's operations? What are the differences between the direct and indirect presentation of cash flows? Why does the Financial Accounting Standards Board allow both methods? Which do you prefer? Why?

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The statement of cash flows is a tool for investors and other users that show the inflows and outflows of cash. This gives investors an indication of how management uses their money and the overall financial ability of managing money and resources. It is divided into three sections so that the activities can be ...

Solution Summary

The solution addresses the following questions regarding the statement of cash flows:

Why are companies required to prepare a statement of cash flows? Why is the statement of cash flows divided into three sections? What does each section tell you about a company's operations? What are the differences between the direct and indirect presentation of cash flows? Why does the Financial Accounting Standards Board allow both methods? Which do you prefer? Why?

All questions are discussed.

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