Week 9 Discussion 2 - Assignment Example

Financial ments Lecturer: Cash Flow ments and Balance Sheet Assess what information may be revealed about the sustainability of a company by review and analysis of a company’s statement of cash flows that may not be revealed in the balance sheet or income statement. The statement of cash flows contains information about cash payments, cash receipts and provides a perspective to view the net change in cash arising from operating, investing and financing activities which the company engages within the trading period.

This provides additional information about companies maintaining some level of dividends at the present state to satisfy investors (Comiskey & Mulford, 2005). It is also significant in demonstrating the cash generating ability of the company which balance sheet the balance sheet fails to show. It reveals the cash needed to maintain plant efficiency and level of operations. It provides information regarding the liquidity of the firm stock issuance, dividend payment, plant asset disposal, machinery purchase, and net change in inventory, accounts receivable and payable.

The balance sheet conceals most of this information (Comiskey & Mulford, 2005).2. Create an argument indicating that the statement of cash flows contains the most valuable information related to a company’s performance for users of financial statement information. Cash flow statements reports cash movements in operating, investing and financing activities thus helping investors and creditors to generate future cash flows through estimations on amounts, unpredictability of future cash flows and timing.

It also provides a basis of setting debts, paying employees and honoring dividends. The net income determines whether the company is making a profit or a loss making it easier for creditors, employees and stockholders to judge the profitability of the company (Marius & Oberholster, 2007). Any financial statement reader easily understands the change of assets and liabilities within the trading period. Cash flows help the stockholders to obtain information regarding the dividend due. For instance, in 2010 Google piled more than $26 billion amounting to about 20% of the value of the company.

It was prompted to release much of cash to shareholders (Marius & Oberholster, 2007). References Marius, K., & Oberholster, J. G. (2007). Analysis and Interpretation of Financial Statements. Hamburg: Juta and Company Ltd, 1999.Comiskey, E. E., & Mulford, C. W. (2005). Creative Cash Flow Reporting: Unravelling Sustainable Financial Performance. John Wiley & Sons.