The cash flow statement should be evaluated by examining the cash flow pattern suggested by the:
A) subtotals of each of the three main sections.
B) operating activities section since this section details the day to day operations of the business.
C) change in cash regardless of which section had the biggest impact on the change.
D) financing section since this section details how much debt the company has incurreD.
Unlike the income statement, which summarizes its detailed information in one number (net income), the statement of cash flows does not provide a summary measure of cash flow performance. Instead, it must be evaluated in terms of the cash flow pattern suggested by the subtotals of each of the three main sections.

Question

Quizplus · Accepted Answer

The cash flow pattern suggested by the subtotals of each of the three main sections is the best way to evaluate the cash flow statement. The operating activities section is important, but it only details the day to day operations of the business. The change in cash is also important, but it doesn't provide enough information on its own. The financing section is important, but it only details how much debt the company has incurred, which is not necessarily an indicator of cash flow performance.

The Cash Flow Statement Should Be Evaluated by Examining the Cash