Question

Which of the following statements is false?

a. The statement of cash flows shows how cash has been generated and how it has been used for an accounting period.
b. Firms only have financial difficulties when both the net income and cash flow from operations are negative.
c. The statement of cash flows is prepared by calculating changes in all balance sheet accounts.
d. Understanding how to prepare a statement of cash flows helps the analyst to better understand and analyze the cash flow statement.

Answer 1

C. The statement of cash flows is prepared by calculating changes in all balance sheet accounts.

Step-by-step explanation:

The net cash flow is a profitability measure that determines how much cash a business has generated in a particular year. The difference between cash inflow and cash outflow is the net cash flow. Net cash flow may also be described as the cash a business generates from its normal operations, less the operations and capital expenditures. Some financial statements will have net cash flow expressed at free cash flow.

Cash flow is a pointer of a company's financial strength. Positive cash flow provides the business with the ability to continue operating, develop new products, or extending into new areas. A company with positive cash flow is healthy and can meet its current liabilities.