[...] reflect the company's liquidity and long-term solvency.
Answer
Cash flows
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Open it Solvency refers to the company's ability to pay its debts as they mature. Cash flows reflect the company's liquidity and long-term solvency.
Original toplevel document
Subject 2. Major Financial Statements creditors. Equity ownership is the owner's investments and the total earnings retained from the commencement of the company. Equity represents the source of financing provided to the company by the owners.
<span>Cash Flow Statement
The primary purpose of the cash flow statement is to provide information about a company's cash receipts and cash payments during a period. It reports the cash receipts and cash outflows classified according to operating, investment, and financing activities.
The cash flow statement is useful because it provides answers to the following simple yet important questions:
Where did the cash come from during the period? What was the cash used for during the period? What was the change in the cash balance during the period?
The statement's value is that it helps users evaluate liquidity, solvency, and financial flexibility.
Liquidity refers to the "nearness to cash" of assets and liabilities, or having enough cash available to pay debts when they are due. Solvency refers to the company's ability to pay its debts as they mature. Cash flows reflect the company's liquidity and long-term solvency. Financial flexibility refers to a company's ability to respond and adapt to financial adversity and unexpected needs and opportunities. For example, cash flow information can be used to evaluate the effects of major investment and financing decisions.
The details of income statements, balance sheets and cash flow statements will be covered in Study Session 8.
Statement of Changes in Owners' Equity
This statement reports the amounts and sources of changes in equity from capital transactions with owners.
Summary
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