1、 1 中文 2835 字 外文资料 The summarize of cash flow statement 1. Introduction Financial reports aim at assuring an efficient dialogue between the entity and the external operators interested in having realistic estimations on the growing perspectives of the entity and, equally, on its sustainability. In sp
2、ite of the fact that the profit and loss account, as a component of the cash-flow statement financial report, provides a dynamic image on an entitys activity, it nevertheless does not offer a clear vision on the financial flows that modify its financial structure and its cash flow. Out of the inform
3、ation officially issued by a certain entity, only that providing financially-significant data is selected, once it expresses nonconventional realities on the cash resources necessary for supporting an efficient investment policy and for remunerating the invested capitals, or that referring to the ex
4、ternal contributions of capital assuring financial balance. Within such a context, to evaluate a companys capacity of generating cash flow and cash-flow equivalents, the users of financial situations analyze the cash-flow statement an expression of the cash and pay operations performed by an entity,
5、 and not only the hypothetical dimension of its performances, determined by the conventions of the obligation accountancy. The cash-flow statement is conceived so that to offer a most pregnant image of the inputs and outputs of the availabilities afferent to the main categories of activities develop
6、ed by a company (exploitation, investment and financing activities) and to justify the treasurys balance at the end of the financial exercise. Otherwise, the cash flow statement explains the company performances in generating cash. The IASB has developed, at the international level, the IAS 7 norm “
7、The cash-flow statements”. This norm renders void and replaces IAS 7 “The situation of changes in the financial position” from 1977 and has been revised in time, its last variant being applied on January 1st, 1994. The other entities, considered small and intermediate, can optionally conclude such a
8、 document. The obligation imposed to some companies to develop The Cash-Flow Statement emphasizes the increasing importance of this statement in evaluating the companys performances. 2 2. The Informational Application of Cash-Flow Statements Drawing a Cash Flow statement has several reasons. First,
9、the financial statements are concluded according to the commitment accounting and based on the principle of exercise independence. In these circumstances, the effects of the agreements and of other events from the company are acknowledged when they are produced and not while the cash and cash consid
10、erations are cashed or paid by the company, an aspect that does not always satisfy the necessities of the financial-accounting information users. Second, the result of the exercise, reflected in The Profit and Loss Account, is affected by a series of accounting conventions (for example, the redempti
11、on calculation system) and does not express the real company performance. In exchange, The Cash-Flow Statement has the role to express unconventional realities because it eliminates the effect of using various accounting treatments for the same agreements and events and, also, does not take into acc
12、ount the operation revenues and expenses considered as calculated that do not generate profits and payments in the analyzed financial exercise (expenses for redemption and provisions, revenues from provisions, revenues from subsidies for investments, etc). Another aspect worth mentioning is that in
13、conditions of under-liquidity, the analysis of cash flows becomes a priority for the analysis of results. The analysis of the company results involves, from the simplest point of view, comparing the revenues and expenses from The Profit and Loss Account, independently from the effective moment of re
14、venues cashing and of the expenses payment. Thus, The Profit and Loss Account allows determining profitability without allowing the direct measure of liquidity by cash flows. There is a tendency to give priority to the profitability analysis to the prejudice of the analysis of liquidity. Profitabili
15、ty and liquidity are two distinct approaches that characterize the company balance sheet. A significant profitability points out that the difference between revenues and expenses ensures the payment of the invested capital. But the revenues do not always correspond to the profits or to the expenses
16、of parties. On the other hand, certain profits do not represent revenues (loans) and certain payments do not immediately determine the expenses (investments). A sufficient or insufficient liquidity does not correspond, by definition, to a significant or inexistent profitability. A chronic negative (
17、absent) profitability means that the company revenues are insufficient to cover expenses and the 3 difference between them cannot pay the invested capital. On a long term, this can lead to a lack of liquidity, in case that the company cannot earn other profits. On a short and medium term, profitabil
18、ity and liquidity can be sensitively divergent. Thus, the profitable companies can face cash difficulties, both as a result of the rapid increase of investments in the fixed capital, which determined the increase of the financing needs for the operation cycle, and as a result of a decrease in the ro
19、tation speed of the current assets. On the contrary, the less profitable companies can maintain a satisfying liquidity in the absence of investments or through the progressive decrease of their value. As a result, liquidity, which depends on the companys profitability and on its financial structure,
20、 is an essential approach drawing the creditors attention. The difference between the revenues capable of generating profits and the expenses capable of generating payments is represented by the cash flow, an index that connects profitability and liquidity (Ooghe H., Van Wymeersch C., 2000). Fourth,
21、 The Cash-Flow Statement, by taking the census of company profits and payments, allows knowing its historical capacity to generate cash flow and offers the elements that lie at the basis of predictions, on short term, of the future cash flows. The cash-flow information is considered by the financial
22、-accounting information users one of the most intelligible and objective source of information that presents the facts without leaving space to subjective interpretations. As a result, the cash-flow information represents the essence of some new modern methods of business evaluation (a method based
23、on updating/capitalization of future cash flows) (Pantea I.P., Deaconu A., 2004). Finally (without pretending to mention all the uses of this situation), The Cash-Flow Statement offers extra information about a series of aspects that have already been analyzed statically, on the account of financial
24、 statements. For example, the change of the company net assets can be statically analyzed starting from the balance sheet, thus being the expression of unsettled agreements. The Cash-Flow Statement presents the change of net assets, dynamically, materialized in the profits and payments of the respec
25、tive agreements carried out during the financial exercise. Consequently, the financial structure is analyzed starting from the Balance sheet and The statement of changing equity capital. Such an analysis mainly reflects the amounts belonging to the financiers, due to be repaid at the end of the financial exercise, without revealing their dynamics. The Cash-Flow Statement presents the profits and payments concerning the external capital coming from the shareholders, creditors, as well as their payment by dividends and interests. The relationship between the
