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Business Finance EBK HEALTHCARE FINANCE: AN INTRODUCTION

a. To discuss : The difference between income statement and cash flow statement. Introduction: The users of financial statements review the financial statements of the company and perform appropriate analysis to take appropriate decisions, whenever required. ‘Income Statement’: It shows the revenue earned and expenses incurred over a period of time. It is used to evaluate the net income generated in a particular period. Cash flow statement: It shows the actual cash flow for the period. It shows the actual inflow and outflow of cash and ignores the non-cash transactions. b. To discuss : The three categories of a cash flow statement. Introduction: The users of financial statements review the financial statements of the company and perform appropriate analysis to take appropriate decisions, whenever required. Operating (O): These include business transactions that are incurred for the primary business i.e., the transactions performed for operating the business. Paid for supplies means supplies are purchased to carry out primary operations of the business. Thus, it is recorded under operating activities section. Received cash from customer for the ride is an operating activity as it is a revenue earned by rendering services. Investing (I): These include business transactions that are incurred to invest money in various types of assets that helps the firm in generating revenues. Purchase of computers means asset is being purchased for providing services to the customers. Thus, it will be considered as an investing activity. Purchased land and building means asset is being purchased for a long term investment purpose. Thus, it will be considered as an investing activity. Sale of old equipment means an asset is being sold that was earlier held for a long period. Thus, it is also considered to be an investing activity. Financing (F): These include business transactions that are incurred to raise funds or money for the smooth functioning of the business. Following are the financing activities: Issue of stock helps the firm to raise funds. Cash dividends are paid to the shareholders who help in raising funds for the company. Thus, it will be considered a financing activity. c. To discuss : The cash flow statement and its importance. Introduction: The users of financial statements review the financial statements of the company and perform appropriate analysis to take appropriate decisions, whenever required. Cash flow statement shows the inflow and out flow of cash. It categorizes each cash transaction into three types of activities i.e., operating, investing and financing activities. Cash flow analysis: Cash flow of a company helps to analyze the position of cash and its equivalent of a company. Thus, it is one of the major financial statements required to evaluate the financial position of a company.

a. To discuss : The difference between income statement and cash flow statement. Introduction: The users of financial statements review the financial statements of the company and perform appropriate analysis to take appropriate decisions, whenever required. ‘Income Statement’: It shows the revenue earned and expenses incurred over a period of time. It is used to evaluate the net income generated in a particular period. Cash flow statement: It shows the actual cash flow for the period. It shows the actual inflow and outflow of cash and ignores the non-cash transactions. b. To discuss : The three categories of a cash flow statement. Introduction: The users of financial statements review the financial statements of the company and perform appropriate analysis to take appropriate decisions, whenever required. Operating (O): These include business transactions that are incurred for the primary business i.e., the transactions performed for operating the business. Paid for supplies means supplies are purchased to carry out primary operations of the business. Thus, it is recorded under operating activities section. Received cash from customer for the ride is an operating activity as it is a revenue earned by rendering services. Investing (I): These include business transactions that are incurred to invest money in various types of assets that helps the firm in generating revenues. Purchase of computers means asset is being purchased for providing services to the customers. Thus, it will be considered as an investing activity. Purchased land and building means asset is being purchased for a long term investment purpose. Thus, it will be considered as an investing activity. Sale of old equipment means an asset is being sold that was earlier held for a long period. Thus, it is also considered to be an investing activity. Financing (F): These include business transactions that are incurred to raise funds or money for the smooth functioning of the business. Following are the financing activities: Issue of stock helps the firm to raise funds. Cash dividends are paid to the shareholders who help in raising funds for the company. Thus, it will be considered a financing activity. c. To discuss : The cash flow statement and its importance. Introduction: The users of financial statements review the financial statements of the company and perform appropriate analysis to take appropriate decisions, whenever required. Cash flow statement shows the inflow and out flow of cash. It categorizes each cash transaction into three types of activities i.e., operating, investing and financing activities. Cash flow analysis: Cash flow of a company helps to analyze the position of cash and its equivalent of a company. Thus, it is one of the major financial statements required to evaluate the financial position of a company.

EBK HEALTHCARE FINANCE: AN INTRODUCTION

EBK HEALTHCARE FINANCE: AN INTRODUCTION

6th Edition

ISBN: 9781567937428

Author: Gapenski

Publisher: YUZU

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Chapter 4, Problem 4.8Q

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What do you know about the interrelationships between income statements, balance sheets, and cash flow statements? Explain

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Chapter 4 Solutions

EBK HEALTHCARE FINANCE: AN INTRODUCTION

Ch. 4 - Prob. 1.1STQ Ch. 4 - Prob. 1.2STQ Ch. 4 - Prob. 1.3STQ Ch. 4 - Prob. 1.4STQ Ch. 4 - Prob. 2.1STQ Ch. 4 - Prob. 2.2STQ Ch. 4 - Prob. 2.3STQ Ch. 4 - Prob. 2.4STQ Ch. 4 - Prob. 2.5STQ Ch. 4 - Prob. 3.1STQ

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What categories of activities are reported on the statement of cash flows? Does it matter in what order these sections are presented?
Explain the purpose of the statement of cash flows and why this statement is needed.
What does the statement of the cash flow report?

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