A statement of cash flows is often one of the most used and least understood of the key financial statements. However, it is a vital report to use when evaluating or analyzing a company. Identifying where a company is receiving and using its cash—through operations, investing, and financing activities—is more important than knowing the company’s net income:Describe the types of accounts/transactions in each section of the statement of cash flows.Explain how the net effect of cash used in each activity will help to evaluate liquidity, solvency, and financial flexibility.Explain why this statement is necessary even when a company has substantial net income.Substantiate your response with examples.
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