Question

The statement of cash flows:

a. is the difference between a firms total expenses and total revenues
b. is equal to a firms net income
c. Is the difference between a firms actual cash receipts in cash payments in a given period
d. is the difference between a firms operating cash flow and its financing cash flow

Answer 1

The statement of cash flows represents the difference between a firm's actual cash receipts and cash payments in a given period, outlining transactions in operating, investing, and financing activities.

Step-by-step explanation:

The statement of cash flows is c. the difference between a firm's actual cash receipts and cash payments in a given period. It is a financial report that shows how changes in balance sheet accounts and income affect cash and cash equivalents, categorizing cash transactions into operating, investing, and financing activities. The purpose of the statement of cash flows is not to report net income as such, which is the role of the income statement, nor is it simply to show the difference in expenses and revenues, which doesn't capture all cash activities. Unlike the budget deficit or surplus, which refers to the government's fiscal year revenue and expenses, the statement of cash flows is focused on the liquidity and solvency of a company.