Financial Accounting
18th Edition
ISBN: 9781260706307
Author: Jan Williams
Publisher: Mcgraw-hill Higher Education (us)
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Question
Chapter 13, Problem 1STQ
To determine
The statement of
Expert Solution & Answer
Answer to Problem 1STQ
b. The company profitability.
Explanation of Solution
Statement of cash flows: Statement of cash flows reports all the cash transactions which are responsible for inflow and outflow of cash and result of these transactions is reported as ending balance of cash at the end of reported period. Statement of cash flows includes the changes in cash balance due to operating, investing, and financing activities.
Justification for incorrect option:
The statement of cash flows helps the users in accessing the ability of the company by reviewing the operating activities.
The statement of cash flow includes the cash receipts and cash payment during the period.
Indirect method, explains the reason for why net cash flows from operating activities differ from net income.
Option a, c, and d are explaining the statement of cash flows to the users. Therefore, all the options are considered as incorrect option.
Justification for correct option:
Statement of cash flows reports all the cash transactions which are responsible for inflow and outflow of cash and result of these transactions is reported as ending balance of cash at the end of reported period. The profitability of the company is determined only from the income statement not from the statement of cash flows. Hence, it is a correct option.
Conclusion
Therefore, the correct option is b.
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Cash Flows from Operations...Ch. 13 - BRIEF EXERCISE 13.3
Cash Flows from Operations...Ch. 13 - Prob. 4BECh. 13 - BRIEF EXERCISE 13.5
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