China IV Essay

Submitted By Thuhatran44
Words: 358
Pages: 2

China IV essay questions Statement of cash flow is a useful statement for external users to determine the viability (especially the company’s ability to pay bills) because it reports the sources, uses and changes in cash of a business. It also explains the liquid resources condition, the flow of cash in and out of the business, any changes in cash on the balance sheet in a period of time. Based on China Trade’s statement of cash flows, the company reported three thousand dollars net loss from its operating activities. Not only that, China Trade also had a negative cash flow from its investing activities of four thousand dollars. Therefore, in light of the rule-of-thumb, the company needs to carefully consider its management of cash flows so that it can maintain the positive number or at least enough to cover its investing activities. As the problem China Trade is facing right now, the company has to borrow more funds in order to support the strategic goals of the company. Even though China Trade’s income statement shows net profit of three hundred dollars; yet, its cash flows from operations were negative three thousand. In comparison between the company’s income statement and the statement of cash flows, we learn there was 5,650 dollars different revenue from sales and cash paid by customers, which were China Trade’s accounts receivable. In addition, the company used cash to purchase some inventory which not be sold. Therefore, the company’s cash was literally stuck