WEEK4 DQ1

Why are companies required to prepare a statement of cash flows? Why is the statement of cash flows divided into three sections? What does each section tell you about the operations of a company?

The cash flow statement reconciles the balance sheet and the income statement of a company. Simply put, the cash flow statement records the company's cash transactions (the inflows and outflows) during the given period. It shows whether all those lovely revenues booked on the income statement have actually been collected.

The statement of cash flows is divided into three sections (cash flow from "operations," "financing," and "investing"), because you have the cash flow from operations that provide in-depth analysis of the cash coming from the sales of the company's goods and/or...