Analysis Using the Statement of Cash Flows

Read this chapter, which shows how to record cash flow from operating activities on the statement of cash flows. The chapter also provides an overview of cash flows from operating activities and steps in preparing a statement of cash flows, which will be covered in more detail in the resources that follow.

Analysis of the statement of cash flows

Business students will benefit throughout their careers from knowing how to analyze a statement of cash flows. We will use the consolidated statement of cash flows from Synotech, Inc. to illustrate the analysis. This company will be used in the next chapter to illustrate the complete analysis and interpretation of all the financial statements. The example is adapted from a real USA company's recent annual report.

Exhibit 55 shows the consolidated statements of cash flows for the years 2010, 2009, and 2008 for Synotech, Inc. We also include portions of Management's Discussion and Analysis of the 2010 statement of cash flows. We will then discuss the statement further, explaining various items and illustrating how the information might be used for decision making.