A statement of cash flows is needed because:Group of answer choicesaccrual-based financial statements are historic.it enables users to understand more clearly the entity's sources and uses of cash.accrual-based financial statements are not accurate.none of the options are true.
Question
A statement of cash flows is needed because:Group of answer choicesaccrual-based financial statements are historic.it enables users to understand more clearly the entity's sources and uses of cash.accrual-based financial statements are not accurate.none of the options are true.
Solution
The correct answer is: it enables users to understand more clearly the entity's sources and uses of cash.
Here's a step-by-step explanation:
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The statement of cash flows is one of the main financial statements of a business. It provides detailed information about a company's cash receipts (cash inflows) and cash payments (cash outflows) during a period.
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This statement is needed because it provides information that complements the other financial statements. While the income statement and balance sheet provide a lot of important information, they do not give a complete picture of a company's cash flow.
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By showing how much cash a company generates and spends during a period, the statement of cash flows helps users understand more clearly the entity's sources and uses of cash. This can be crucial for assessing a company's liquidity, solvency, and financial flexibility.
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The other options are not accurate. Accrual-based financial statements are not inherently historic or inaccurate; they simply use a different method of accounting that recognizes revenues and expenses when they are earned or incurred, regardless of when cash is exchanged. And the statement "None of the options are true" is incorrect because one of the options is indeed true.
Similar Questions
The statement of cash flows, provides users of financial statements with a basis to assess the ability of the entity to generate cash and cash equivalents and the needs of the entity to utilize those cash flowsGroup of answer choicesTrueFalse
The statement of cash flows is a financial statement that shows ______.
The Statement of Cash Flows:Multiple Choiceis an optional financial statement.shows the change in the fair value of the company's common stock during the period.shows how cash changed during the period.shows the dividends that will be paid in the future.
The Statement of cash flows helps management, investors, creditors and other interested parties evaluate the following about the entity (choose all that apply):Group of answer choicesCash investing and financing transactions for the periodExplains the difference between profit and net cash provided (used) by operating activitiesAbility to pay share dividends and meet obligationsAbility to generate future cash flows
The primary purpose of the statement of cash flows is to:show the deficit of cash during the period.provide information about the profit or loss during the accounting period.provide information about the cash receipts and cash payments made during the accounting period.show the cash balance at the end of the period.
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