Week 9 Discussion 2 Assignment Example | Topics and Well Written Essays - 250 words

Week 9 Discussion 2 - Assignment Example It is also significant in demonstrating the cash generating ability of the company which balance sheet the balance sheet fails to show. It reveals the cash needed to maintain plant efficiency and level of operations. It provides information regarding the liquidity of the firm stock issuance, dividend payment, plant asset disposal, machinery purchase, and net change in inventory, accounts receivable and payable. The balance sheet conceals most of this information (Comiskey & Mulford, 2005). Cash flow statements reports cash movements in operating, investing and financing activities thus helping investors and creditors to generate future cash flows through estimations on amounts, unpredictability of future cash flows and timing. It also provides a basis of setting debts, paying employees and honoring dividends. The net income determines whether the company is making a profit or a loss making it easier for creditors, employees and stockholders to judge the profitability of the company (Marius & Oberholster, 2007). Any financial statement reader easily understands the change of assets and liabilities within the trading period. Cash flows help the stockholders to obtain information regarding the dividend due. For instance, in 2010 Google piled more than $26 billion amounting to about 20% of the value of the company. It was prompted to release much of cash to shareholders (Marius & Oberholster,