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Essay / Research Paper Abstract
This 4 page paper is written in two parts. The first part is an example of a cash flow statement using the indirect method. The second part of the paper then considers how the statement is it together, who might find the information helpful and the differences; along with some advantages and disadvantages f the direct and the indirect method of preparing cash flow statements. The bibliography cites 6 sources.
Page Count:
4 pages (~225 words per page)
File: TS14_TEcashindrt.rtf
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Unformatted sample text from the term paper:
Decrease in receivables 17,000 Decrease in inventory 13,000 New loans 0 New investment 8,000 Subtotal 52000 Uses of cash Decrease in payables 4,000 Increase in receivables 0 Increase in
inventory 0 Repay loans 12,000 Purchase of other assets 14,000 Distributions 10,000 Subtotal 40000 Net cash flow 12000 In producing the cash flow this could only be produced for the
month of February as the calculation rely on differences wit the month before Part 2 The production of cash flow statements is of benefit to a range of users.
If we look at the different section of the cash flow statement and how they are made up we can also consider what users may be interested in the use
of the statement and the different parts. The purpose of a cash flow statement is to show how cash is generated and how it is spent or used (Elliott
and Elliott, 2004). This may be used alone, but is of the greatest value when it is used in conjunction with other financial statements. The cash flow statement reports on
the operating, investing and financing activities. The operating activities are the cash levels that are generated from the usual activities and included adjustment in order to show the cash
flow rather than the picture that profit and loss or income statement gives. For example, adding back in the deprecation, as this is a theoretical cost rather than an actual
cost in terms of cash flow (Brickner and McCombs, 2004). For example, if the equipment was bought with cash, this has already been spent, and does not represent an outward
cash flow. Parties that are most interested in this may include potential financers, such as banks and investors who will want to see what the real ability of the company
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