BUSI 2150U Chapter Notes - Chapter 5: Cash Flow Statement, Cash Flow, Deferral
Document Summary
Cash flow, profitability, and the cash flow statement. Without adequate cash or cash flow, an entity won"t be able to operate because it won"t be able to pay its bills. If an entity can"t generate enough cash from its business activities to meet its needs it will have to raise cash by borrowing, selling shares, or selling assets. Stakeholders sometimes don"t give enough attention to cash flow when evaluating an entity. The standard measure of performance under accrual accounting, earnings, isn"t designed to reflect flows of cash. Cash flow isn"t a better or worse measure than earnings; it"s just a different measure of performance; each has its role to play. The cash cycle is the process of how an entity begins with cash, invests in resources, provides goods or services to customers using those resources, and then collects cash from customers.
