COMMERCE 1BA3 Study Guide - Cash Flow, Financial Statement, Income Statement

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Objective 1: explain the uses of the statement of cash flows: the statement of cash flows, one of the four required financial statements shows the changes in cash (including cash equivalents) for a specified period. While a business must have profitable operations in order to operate over a long period of time, it must also have cash to operate. More information can be obtained for evaluation of the company by studying the income statement together with the cash-flow statement: cash includes cash on hand, cash in the bank, and cash equivalents. Cash equivalents are short-term investments that are readily convertible into cash such as money market investments and investments in canadian government treasury bills. Objective 2: explain and classify cash flows from operating, investing, and financing activities. The total net cash flow from operating activities will be the same whether the direct or indirect method is used; just the presentation of data differs.

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