questions for discussion

Both the cash flow statement and other financial statements, such as the income statement and balance sheet statement, are associated because they rely on one another to provide critical details to management in order to promote the effectiveness of the decision-making process. For example, a cash balance statement shows cash in and cash out in the industry, including details on the company's cash on hand. On the opposite, funds on hand at a certain date of the cash flow statement are then included in the balance sheet to assess the company's financial status. Lastly, the income statement relies on the cash flow statement to determine the various financial ratios as well as compares the ratios with industry performance to assist management in the decision-making process.

2. Question

The cash flow statement is a critical financial statement because it determines the cash at hand through analysis of cash inflow and cash outflow activities in the company as a result providing a correct information concerning the amount money available for use in the company. Therefore, the significant contribution of the cash flow statement is that it provides an accurate amount of cash at hand available to the business entity that will be used alongside other financial statements such as income and balance sheet statements to determine the company performance for a given financial period.

3. Question

Cash flow manipulation can easily be detected because it will affect other financial statements that play and important role in decision-making process. An alteration in the cash flow statement will trickle down to the income and balance sheet statement as a result providing inaccurate information to the management. With an incorrect data, analysis of the various financial ratios will not reflect the actual position of the company performance.

4. Question

The fund's statement was traditionally used to determine the change in the current assets and current liabilities of two balance sheets. Besides, it showed funds inflow and funds outflow for a given financial period. It was later adapted to cash flow statement because it accurately showed various activities within the company that translated in the cash inflow and cash outflow, therefore, making it easier for management to know the amount of money available at hand.