Answered: a. explain the information found on the…

a. explain the information found on the statement of cash flow. b. how do the direct and indirect methods of preparing the statement of cash flow different?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

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a. explain the information found on the statement of cash flow.

b. how do the direct and indirect methods of preparing the statement of cash flow different?

Definition Definition Net amount of cash that an entity receives and expends over the course of a given period. For a business to continue operating, positive cash flows are required, and they are also necessary to produce value for investors. Investors in particular prefer to see growing cash flows even after capital expenditures have been paid for (which is known as free cash flow).

Expert Solution

Step 1

A cash flow statement is a part of a financial statement that shows the cash inflows and cash outflows from and into the organization.

There are two methods of preparation of cash flows statement -

1) Direct method

2) Indirect method

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