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Learning Objective $21-01$ Explain the usefulness of the statement of cash flows.

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Decision makers focus on the prospects of receiving a cash return from their dealings with a firm. But it is the ability of the firm to generate cash flows to itself that ultimately determines the potential for cash flows to investors and creditors. The statement of cash flows fills an information gap left by the balance sheet and the income statement by presenting information about cash flows that the other statements either do not provide or provide only indirectly.

Usefulness of Statement of Cash Flows

Knowledge Check $01$

Which of the following statements about cash flows are true?

Note: Select all that apply.

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The income statement reports cash flow information directly.

The income statement reports cash flow information directly.

The income statement reports cash flow information indirectly.

The income statement reports cash flow information indirectly.

The statement of cash flows reports information about cash flows directly.

The statement of cash flows reports information about cash flows directly.

The statement of cash flows reports information about cash flows indirectly.

The statement of cash flows reports information about cash flows indirectly.