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Working with Financial Statements
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Working with Financial Statements
Cash Flow and Financial Statements
- Firms generate cash by selling a product, an asset or a security and they spend it in paying for materials, labor to produce a product, purchasing assets, payment to creditors and owners
- Cash flow from assets= Cash flow to creditors + Cash flow to owners
- Sources and uses of cash
- Activities that bring in cash are called SOURCES OF CASH
- A decrease in an asset account or an increase in a liability
- Activities that involve spending cash are calle USES OF CASH or APPLICATIONS OF CASH
- An increase in a lef-side or a decrease in a right account
- Activities that bring in cash are called SOURCES OF CASH
- The statement of cash flows
- A firm's financial statement that summarizes its sources and uses of cash over a specified period
- Firms generate cash by selling a product, an asset or a security and they spend it in paying for materials, labor to produce a product, purchasing assets, payment to creditors and owners