Cash Flow Essay Example | Topics and Well Written Essays - 250 words

Cash Flow - Essay ExampleIt (comparison) in addition identifies the differences in timing between cash payments and expenses.Through the speak method of cash flows, reconciliation of the developed cash flows from operating activities with the accrual-based accounting net income can be done. The caller-ups stated positiveness and its cash holding position is therefore clearly presented to its stakeholders in this manner.The in use up method of cash-flow preparation requires a well-established link between the balance sheet and the income statement. The statement users be therefore, able to systematically and logically determine the companys financial statements. The companys current assets and liabilities reflected on the balance sheet are easily traced back to its operations summarized in the income statement.The use of verifying method makes it possible to disclose the companys non-cash transactions. The statement users are therefore, in a better position to understand how non-cash transactions are not sources of cash flows but factors of net income.Direct method is an alternative to the indirect method of cash flows. The companys cash payments and receipts with detailed categories are disclosed separately when using the direct method. Such a practice can make the financial statement to appear clustered. Auditors also persist to ask for an additional reconciliation schedule on cash flows and income from companys using direct method. However, accounting rule-setting authorities allows companies to use indirect method by disclosing, in a simpler statement format, changes in current assets and liabilities.As a CFO I would prefer the indirect statement of cash flows method. The indirect method starts by identifying the companys net income or loss. Subsequently, any non-cash expenses, such as depreciation, amortization, loss provision for accounts due and any losses on the sale of a