MGT120H5 Chapter Notes - Chapter 12: Cash Flow Statement, Net Income, Current Liability
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MGT120H5 Full Course Notes
Verified Note
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Document Summary
Statement of cash flows reports the entity"s cash flows (cash receipts and payments) during the period. This statement predicts future cash flows, evaluate management decisions, determine the company"s ability to pay dividends, and shows the relationship of net income to the business"s cash flows. Three activities are operating activities, investing and financing activities. Operating activities - create revenues, expenses, gains and losses -- net income. This is the most important of the three categories because it reflects the core of the organization. A successful business must generate most of its cash from operating activities investing activities - increase and decrease long-term assets, such as computers and software, land, buildings, equipment, and investments in other companies. Purchases and sales of these are investing activities. borrowing money, dividends. financing activities - obtaining cash from investors and creditors. The indirect method reconciles net income to net cash provided by operating activities.
