Question 2 Flashcards

1
Q

Cash flow pro-forma

A
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2
Q

Notes for cash flow

A
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3
Q

The cashflow statement is a ‘reconciliation’ between which figures

A
  • profit before tax and the movement in cash from one accounting period to the next
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4
Q

Why is the cash flow included in the financial statements?

A
  • poor cash flow is a reason why many companies fail so important that users have this information.
  • sales, profit margin etc may all be positive but if cashflow is poor because eg. cash not being collected promptly from customers, credit periods not being maximised from suppliers a business will fail
  • it reconciles profit to cash movement stripping out the effects of the accruals concept, noncash adjustments and items of expenditure eg. assets which are not reflected in the p/l ac at point acquisition
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