Key Concept Exercise Interpreting Financial Statements

1. Income statement 2. Balance sheet 3. Cash flows Statement What type of information does the statement of cash flows provide investors It provides the information to the investors to find expenditures for the items that are ultimately intended to generate the future income and cash flows. The indirect method of cash flows helps in reconciling the effect of accruals of key items in the profit and loss account including the non-cash transactions , deferrals and accruals of operating cash receipts and cash payments to the investors . It helps the investors to analyze the effect of accruals to obtain the information about the earnings quality. How do changes in liquidity affect an organization Liquidity is your companys ability to pay the bills as they come due. The Cash Flow Statement is the best resource for testing a companys liquidity because it shows changes over time, rather than absolute dollar amounts at a specific point in time. Its also useful in determining the short-term viability of a company. Cash flow statement determines the firms liquidity. Cash is the lifeblood of any business, and without it survival is very unlikely. Do you agree or disagree Explain what information a statement of