How Well Do You Understand Cash Flow Statements?

Summary Title: Understanding Cash Flow Statements

• Cash flow statement is a financial statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents, and breaks down the analysis to operating, investing and financing activities.
• People and groups interested in cash flow statements include investors, creditors, management, and analysts.
• The cash flow statement is an important indicator of a company's financial health, as it reveals the quality of a company's earnings and the firm's capacity to pay interest and dividends.
• The cash flow statement differs from the balance sheet and income statement in that it excludes non-cash transactions required by accrual basis accounting.
• The cash flow statement is intended to show the sources of a company's cash flow and how it was used over a specific time period.
• Cash basis financial statements were common before accrual basis financial statements.
• The cash flow statement was developed in 1863 by the Dowlais Iron Company to explain the lack of funds for investment despite making a profit.
• In 1987, FASB Statement No. 95 (FAS 95) mandated that firms provide cash flow statements.
• US GAAP and IAS 7 rules for cash flow statements are similar, but some differences exist.
• Operating activities include production, sales, and delivery of the company's product, as well as collecting payment from customers.
• Investing activities include acquiring and disposing of long-term assets and investments.
• Financing activities include inflows and outflows of cash between investors and the company.

Test your knowledge on understanding cash flow statements with this informative quiz! Learn about the importance of cash flow statements, who uses them, and how they differ from other financial statements. Test your understanding of operating, investing, and financing activities, as well as the history and development of cash flow statements. This quiz is perfect for investors, analysts, or anyone looking to enhance their financial literacy and understanding of cash flow statements.