Concept explainers
The purposes of the statement of
a. evaluate management decisions.
b. determine ability to pay debts and dividends.
c. predict future cash flows.
d. All of the above
Statement of cash flows
Statement of cash flows: It is one of the financial statement that shows the cash and cash equivalents of a company for a particular period. It determines the net changes in cash through reporting the sources and uses of cash due to the operating, investing, and financing activities of a company.
To Determine: The purpose of the statement of cash flows.
Answer to Problem 1QC
Explanation of Solution
Explanation for correct answers:
Purpose of statement of cash flows are given below:
- To predict future cash flows of the business,
- To determine the ability of the business to pay dividend and settle debts, finally
- To evaluate the management decision.
Hence, (d) is the correct option because all the stated purposes of statement of cash flows.
Explanation for incorrect answers:
- Option (a) is incorrect because evaluate management decision alone is not the purpose of statement of cash flows. Purpose of statement of cash flows refers to all the activities mentioned in options (a), (b), and (c).
- Option (b) is incorrect because determine ability to pay debt and dividend alone is not the purpose of statement of cash flows. Purpose of statement of cash flows refers to all the activities mentioned in options (a), (b), and (c).
- Option (c) is incorrect because predict future cash flows alone is not the purpose of statement of cash flows. Purpose of statement of cash flows refers to all the activities mentioned in options (a), (b), and (c).
Want to see more full solutions like this?
Chapter 14 Solutions
ACC 201/202 MYACCLAB E-TEXT ONLY >I<
- Explain the purpose of the statement of cash flows and why this statement is needed.arrow_forwardWhich is the proper order of the sections of the statement of cash flows? A. financing, investing, operating B. operating, investing, financing C. investing, operating, financing D. operating, financing, investingarrow_forwardWhen preparing the operating section of the statement of cash flows, using the indirect method, how must gains and losses be handled? Why?arrow_forward
- What function does the statement of cash flows serve, as one of the four basic financial statements?arrow_forwardWhich of the following financial statements should be prepared first? A. Balance Sheet B. Income Statement C. Retained Earnings Statement D. Statement of Cash Flowsarrow_forwardNeed for a Statement of Cash Flows. The accrual basis of accounting creates the need for a statement of cash flows. Explain.arrow_forward
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage LearningPrinciples of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax CollegeFinancial Reporting, Financial Statement Analysis...FinanceISBN:9781285190907Author:James M. Wahlen, Stephen P. Baginski, Mark BradshawPublisher:Cengage Learning
- EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENTFinancial Accounting: The Impact on Decision Make...AccountingISBN:9781305654174Author:Gary A. Porter, Curtis L. NortonPublisher:Cengage LearningCornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning