ACCT 1A Lecture Notes - Lecture 24: Cash Flow, Business Valuation, Financial Statement

• School: Irvine Valley College
• Department: Accounting
• Course: ACCT 1A
• Professor: Bradshaw

Document Summary

The ability to analyse accounting info to tell managers, bankers and others what difference various accounting choices, or business events in general, would make to the financial statements is very important to accountants. Used to compare different companies w/ different accounting policies. Purpose of the analysis of cash flows. Produce a measure of performance that is based on day-to-day cash flow: cash. To inco rporate other non-operating cash inflows and outflows such as from from ordinary business activities, not accrual profits investing in new assets, borrowing/repaying debts, Provides a detailed analysis in the movement of cash during the period. Evaluate management"s strategy for managing cash and used to make a better judgement of the company"s liquidity, solvency, risk and opportunities than just from i/s and b/s. Importance of cash flow info to users. A business can"t operate/survive without sufficient cash. Under accrual accounting, evaluating cash performance is difficult. Cash is central to valuing a company.