The statement of cash flows is one of the four required financial statements. Its primary purpose is to provide information about the companys cash receipts and cash payments. This fills a gap left by the income statement (not prepared on a cash basis) and the balance sheet (shows only the cash balance at the end of the period).

Read Chapter 23 and then answer the following questions:

What types of useful information is provided by the statement of cash flows?

The statement of cash flows separates cash receipts and payments into three classifications. What are these three classifications and how do they differ?

Of the three classifications of cash receipts and payments, which one should always be positive and why?