In this unit you learned about the preparation and content of financial statements. A common phrase in finance is “cash is king! ” With this in mind, the Statement of Cash Flows has been heralded as the most important financial statement.
The Statement of Cash Flows on page 2.1.6 presents how changes in Balance Sheet accounts will affect a company’s cash balance. Refer to that information and discuss how an increase in your company’s accounts payable from one period to the next is a means to maintain high cash balances in your company’s bank account. Do you believe there are any ethical considerations in slowing payments to your suppliers for the sake of increasing your company\’s bank balances?
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The cash flow statement is one of the main financial statements as it reports the amount of cash made and used in operations, investments, and financial activities. The cash flow statement provides insight into the amount available or unavailable in the company that the income statement and balance sheet cannot (Belobo & Pelser, 2014). To guarantee smooth operations, enough cash is needed by accounting entities. Therefore, as a current asset, cash flow is necessary to meet the immediate obligations of the entity. In this case, low cash levels negatively impact the smooth running of operations/entities (Eakins & McNally, 2014). A lot of emphases is placed on cash flow, thus the reason why all entities develop a cash budget. For an accounting entity to boost the level of cash for a given period of time, delayed payment of accounts payables comes in handy. The delay is meant to increase the amount of cash at the company’s disposal. Although the cash levels tend to go up, however, the resulting financial implications…
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