Discuss the importance of the statement of cash flows as an analytical tool for users of financial statements.

Assignment 04

F03 Financial Statement Analysis

Directions: Be sure to make an electronic copy of your answer before submitting it to Ashworth College for grading.  Unless otherwise stated, answer in complete sentences, and be sure to use correct English spelling and grammar.  Sources must be cited in APA format.  Your response should be four (4) pages in length; refer to the “Assignment Format” page for specific format requirements.

1. Discuss the importance of the statement of cash flows as an analytical tool for users of financial statements.

2. Explain the meaning of the three categories of a statement of cash flows: operating, investing and financing activities. Give an example of an inflow and an outflow for each category.

3. Identify the following items as operating (O), investing (I), or financing (F) activities.

a. Property, plant and equipment

b. Current maturities of long-term debt

c. Inventories

d. Accounts receivable

e. Common stock

f. Short-term debt

g. Accounts payable

h. Net income

i. Accumulated depreciation

j. Dividends

4. Explain how it is possible for a firm with a positive net profit to generate negative cash flow from operating activities.