Cash Flow Statement

Your friend, Tom Smith is the owner-president of a consulting company. He recently completed his third year of business and received the annual financial statements from his accountants. He finds the income statement and balance sheet informative, but does not understand the statement of cash flows. He said the section of operating activities is really confusing. He says this first section consists of a lot of additions and subtractions which did not make any sense.

Write memo to Tom including the following:

Explaining the purpose of the statement of cash flows.
Explaining the form and content of the statement of cash flows.
The advantages and disadvantages of the direct and indirect methods of preparing this financial statement.
Which method is preferred by the FASB?
Which method is more popular to use?
Grading Rubric

50%

Basic response to the DB question

30%

Additional research supporting the initial answer to the DB question

20%

Comments which serve to further the discussion, apply real world example or lend to enhancing the clarity of the concepts

In your own words, please post a response to the Discussion Board and comment on at least two other postings. You will be graded on the quality of your postings.

For assistance with your assignment, please use your text, Web resources, and all course materials.

Course Materials

Course Materials