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Statement of Cash Flows Video Lecture | Accountancy Class 12 - Commerce

49 videos|111 docs|56 tests

FAQs on Statement of Cash Flows Video Lecture - Accountancy Class 12 - Commerce

1. What is the purpose of the Statement of Cash Flows?
Ans. The purpose of the Statement of Cash Flows is to provide information about the cash inflows and outflows of a company during a specific period. It helps users of financial statements, such as investors and creditors, to assess the company's ability to generate cash and its cash management practices.
2. How is the Statement of Cash Flows different from the Income Statement?
Ans. While the Income Statement focuses on a company's revenues, expenses, and net income, the Statement of Cash Flows focuses on the cash flow activities of the company. The Statement of Cash Flows provides information about the cash generated or used by operating, investing, and financing activities, whereas the Income Statement shows the company's profitability.
3. What are the three main sections of the Statement of Cash Flows?
Ans. The Statement of Cash Flows typically consists of three main sections: operating activities, investing activities, and financing activities. The operating activities section shows the cash flows from the company's core operations, such as sales and expenses. The investing activities section reflects the cash flows from buying or selling long-term assets. The financing activities section includes cash flows related to borrowing, issuing or repurchasing stock, and paying dividends.
4. How can the Statement of Cash Flows help assess a company's financial health?
Ans. The Statement of Cash Flows provides valuable information to assess a company's financial health. By analyzing the cash flows from operating activities, investors can evaluate the company's ability to generate cash internally. The cash flows from investing activities indicate the company's investment decisions and potential for future growth. The cash flows from financing activities reveal the company's capital structure, debt levels, and dividend policies.
5. What are some limitations of the Statement of Cash Flows?
Ans. While the Statement of Cash Flows is a useful financial statement, it has some limitations. It does not provide information about non-cash transactions, such as the issuance of stock for the acquisition of assets. Additionally, the timing of cash flows may not always align with the recognition of revenues or expenses, making it challenging to assess the company's overall financial performance solely based on this statement.
49 videos|111 docs|56 tests

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