Question 2 Flashcards
1
Q
Cash flow pro-forma
A
- Put answer in
2
Q
Notes for cash flow
A
- Put answer in
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
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