A household functions like a small business. In both the household and business settings, the importance of stable cash flow cannot be emphasized enough. Households and businesses must maintain good cash flow to meet their continued obligations should something happen or if there is an economic downturn. Planning for both short- and long-term cash needs is important to both the household entity and the business entity.

Identify the three categories that appear on a Statement of Cash Flows and give two examples of items that are shown under each particular category. (9 points)

Of the four primary financial statements used in accounting, managers often indicate that the Statement of Cash Flows is the most beneficial statement, in their opinion. Why do you suppose they believe this particular statement to be so important? (5 points)

In your opinion, what are three factors that should determine how much money should be set aside in an emergency fund for both a household and a business? (6 points)