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Eat at My Restaurant

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Submitted By kgia13
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Eat at my Restaurant
Kiersten Galuszka
Colorado State University-Global Campus

The statement of cash flows is regarded as one of the most important financial statements in regards to determining the liquidity of a company. Cash is how a business pays its bills and operates its business. Lenders and shareholders look to the statement of cash flows to understand how well a company manages its cash and cash equivalents. The statement of cash flows “classifies cash receipts and cash payments into operating, investing, and financing activities.” (Gibson, 2013). Financial ratios have been created in order to compare cash flows to other variables in the statement of cash flows. The cash flow statement can also be utilized to compare the liquidity and profitability of different companies. Net cash provided by operating activities is a calculation derived from the inflows and outflows of cash in the operating section of the statement of cash flows. The operating activities include the effects from cash transactions and other situations that affect net income. Examples of operating cash inflows are money received from interest, sales on goods and services, and return on equity. Cash outflows include payments to employees, taxes, and payments of interest expense. The operating activities section is presented using either the direct or indirect method. In the indirect method, the statement of cash flows begins with the net income or loss for the period. Additions, such as cash received from customers and interest received, are added to net income, and subtractions, such as cash paid to suppliers and taxes paid, are deducted from the net income. The resulting amount is the net cash provided by operating activities. To determine the net cash flow from operating activities using the direct method, the cash receipts from sales is added to the reported interest and

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