The purposes of the cash flow statement are? A- to evaluate management decisions

Question

The purposes of the cash flow statement are? A- to evaluate management decisions B- to determine the ability to pay liabilities and dividends C- to predict future cash flows D- all of the answers are correct E- none of the above answers is correct The purposes of the cash flow statement are? A- to evaluate management decisions B- to determine the ability to pay liabilities and dividends C- to predict future cash flows D- all of the answers are correct E- none of the above answers is correct A- to evaluate management decisions B- to determine the ability to pay liabilities and dividends C- to predict future cash flows D- all of the answers are correct E- none of the above answers is correct

Explanation / Answer

SOLUTION

Correct Option is Option D i.e. all of the answers are correct.

1. The purposes of the cash flow statement are to evaluate management decisions - It helps evaluate management decisions because it reports the cash flows resulting from management’s decisions, thereby giving investors and creditors information for evaluating them.

2. The purposes of the cash flow statement are to determine the ability to pay liabilities and dividends - It helps predict the ability to make debt payments and pay dividends because the statement of cash flows reveals whether the company had a positive or negative cash flow during the period.

3. The purposes of the cash flow statement are to predict future cash flows - It helps to predict future cash flows because It contains information related to past receipts and payments, and past information helps to predict future cash flows.

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