Which of the following information can be gleaned from a statement of cash flows but is not obvious from looking at financial statements prepared on an accruals basis?
A)whether the entity is generating cash from its operations
B)whether the entity is collecting its receivables in a timely manner
C)whether the entity is likely to be able to pay its debts as and when they fall due
D)all options are true

Question

Quizplus · Accepted Answer

All options are true. The statement of cash flows provides information about how much cash is generated or used by the company's operating, investing, and financing activities, which cannot be easily determined from financial statements prepared on an accruals basis. It shows whether the entity is generating cash from its operations, whether the entity is collecting its receivables in a timely manner (by looking at the changes in the accounts receivable balance), and whether the entity is likely to be able to pay its debts as and when they fall due (by looking at the cash flow from financing activities).

Which of the Following Information Can Be Gleaned from a Statement