C. Statement of Cash Flows
The statement of cash flows is a third key financial statement issued by public companies. It shows all cash inflows and cash outflows that a company experiences during a given accounting period.
The cash inflows include cash from ongoing operations and external investment sources. The cash outflows include cash paid for business expenses along with investment activities.
The cash flow statement is broken down into three sections: cash flows from operating activities, cash flows from investing activities and cash flows from financing activities.
Because public companies use the accrual method of accounting, the income statement may not accurately reflect a company's cash position. The accrual method of accounting requires companies to record revenue when earned, not when cash is paid for a product or service. That means a company could be increasing earnings, while at the same time its cash balance is declining. (For more, see What is a Cash Flow Statement?)
D. Pro Forma Statements
Pro forma statements contain figures illustrating "what if" scenarios to highlight current or projected figures. They are used to reflect a proposed merger or acquisition or emphasize certain figures when a company issues an earnings announcement to the public.
Pro forma statements may not comply with generally accepted accounting principles (GAAP) and should be analyzed with caution by investors. (For more, see Understanding Pro Forma Earnings.)
Cash Flow Management
InvestingTune out the accounting noise and see whether a company is generating the stuff it needs to sustain itself.
InvestingPro Forma is a Latin term that means "for the sake of form." It's a term mostly used in accounting, for financial statements prepared by accountants. So why would anyone do anything for the sake ...
InvestingCash flow from operating activities is a section of the Statement of Cash Flows that is included in a company’s financial statements after the balance sheet and income statements.
InvestingThe metrics for the Statement of Cash Flows is best viewed over time.
InvestingCash flow analysis is a critical process for both companies and investors. Find out what you need to know about it.
InvestingDifferences between accrual accounting and cash flows show why net income is easier to manipulate.
InvestingThe financing activity in the cash flow statement measures the flow of cash between a firm and its owners and creditors.
InvestingA cash flow statement records the amounts of cash and cash equivalents entering and leaving a company.