MGT 11A Chapter 12: CHAPTER 12 - pt 1
Document Summary
Purpose of the statement of cash flows. Statement of cash flows: reports cash receipts (inflows) and cash payments (outflows) for a period. Cash flows separated into operating, investing, and financing activities. Explains the difference between beginning and ending balances of cash and cash equivalents. Bc cash and cash equivalents are combined, the statement of cash flows does not report transactions between cash and cash equivalents, such as cash paid to purchase cash equivalents and cash received from selling cash equivalents. Cash flows help users decide whether a company has enough cash to pay its debts. Also help evaluate a company"s ability to pursue opportunities. Managers use cash flow info to plan day-to-day operations and make long-term investment decisions. Cash flows include both cash and cash equivalents. 1) readily convertible to a known amount of cash. 2) be sufficiently close to its maturity so its market value is unaffected by interest rate changes.
