From the course: Financial Accounting Part 2
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Analyzing cash flows
From the course: Financial Accounting Part 2
Analyzing cash flows
- The statement of cash flows, as its name implies, summarizes a company's cash flows for a period of time. The statement of cash flows explains how a company's cash was generated during the period and how that cash was used. You might think that the statement of cash flows as a replacement for the income statement, but the two statements have very different objectives. The income statement measures the results of operations for a period of time. Net income is the accountant's best estimate at reflecting a company's economic performance for a period. The income statement provides details as to how the retained earnings account changes during a period, and ties together, in part, the owner's equity sections of comparative balance sheets. The statement of cash flows, on the other hand, provides details as to how the cash account changed during the period. The statement of cash flows reports the period's transactions and…
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