Statement of Cash

Statement of cash flow is important when assessing the financial strength of an organization. The statement of cash flow is broken down into three different categories operating activities, investing activities, and financing activities. Each of the categories helps to assess the financial strength of the company and rely on the analysis to identify key factors that drive business strategy and productivity. This paper will demonstrate why statement of cash flows is important when assessing the financial strength of an organization.

The purpose of the statement of cash flow is to provide information about a company's cash receipts and cash payments for a period. Also the statement of cash flow has a secondary objective to provide cash-basis information about a company's operating, investing, and financing activities. The information that is provided by a statement of cash flow is it reports cash receipts, cash payments, and net changes from the results of the company's operating, investing, and financing activities during a period. The statement of cash flow format reconciles the beginning and ending cash for the period (Hunt, 2012). With computer technology and software companies can analyze how corporate cash balances have evolved over time. Businesses can now look back at how the company made money in the past and look forward to liquidity planning to predict cash flow. The sections of the cash flow statement are operating activities, investing activities, and cash flow from financing activities.

When a statement of cash flow from operating activities is assessed financial analyst can look and see how a company can navigate through a bad economy. An analyst can see how management response to issues in the market place. The assessment of the statement of cash flow would include operating liquidity movements such as payments to vendors, accounts receivable, salaries, rent, and insurance payments. Operating activities are important because they show if a company is able to meet all their obligations and if a business cannot meet their obligations then their financial strength is weak, but a company that can gives strength to their financial solidity.

Cash flow from investing activities is purchases and sales of long-term or fixed assets which include equipment, production machinery, land and manufacturing facilities. Assessing the statement of cash flow for investing would be used to determine if the business is able to operate with the intense competitive pressures in the market place. How is the businesses investing liquidity movements and is the management able to ensure long term financial strength. Next is the company able to create long-term stability in the next one to ten years. Investing activities include purchases or sales of equipment, property or a subsidiary. When assessing the statement of cash flow investing activities companies usually that show a negative investment cash flow due to all capital