Cash Flows Statement

The cash flows statement is one of the five respective financial statements issued by businesses. The cash flows statement converts accrual accounting information into a cash basis report keying in on three distinct areas of cash. This includes cash from regular operations, cash flow from investing (purchase/sale of fixed assets) and financing.

Cash Flow From Operations – Basic Formula

n a pure cash only operation, the profit as reported on the income statement would also be cash flow from operations.  But modern-day business is not pure in how it is conducted.   Companies agree to pay suppliers at a later time, payroll is weekly or monthly, benefits that are paid in the future are offered to employees, credit is extended to customers; the list can go on and on.

Debt to Equity Ratio

Another leverage ratio used to evaluate the financial integrity of a business is the debt to equity ratio.  It is strictly a bottom half balance sheet ratio.  Its result explains the relationship of volume of debt and corresponding equity to finance the operations of a business, i.e. the purchase of assets.

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