Question 2

Question 1

Cash flow pro-forma

Answer 1

1. Put answer in

Question 2

Notes for cash flow

Answer 2

1. Put answer in

Question 3

The cashflow statement is a ‘reconciliation’ between which figures

Answer 3

• profit before tax and the movement in cash from one accounting period to the next

Question 4

Why is the cash flow included in the financial statements?

Answer 4

• poor cash flow is a reason why many companies fail so important that users have this information.
• sales, profit margin etc may all be positive but if cashflow is poor because eg. cash not being collected promptly from customers, credit periods not being maximised from suppliers a business will fail
• it reconciles profit to cash movement stripping out the effects of the accruals concept, noncash adjustments and items of expenditure eg. assets which are not reflected in the p/l ac at point acquisition