The cash flow statement, in the not-too-distant past, included information in only two categories: sources of funds and uses of funds. Funds were usually defined as working capital (current assets minus current liabilities). The present-day statement provides information about cash flows from operating activities, investing activities, and financing activities. The earlier statement permitted the information to be about changes in working capital or in cash, while today's cash flow statement deals specifically with information about flows in cash and cash equivalents.
Required
1. Explain why you think the present-day cash flow statement, with its disclosure of the three different kinds of activities, is or is not an improvement over the earlier model that showed only sources and uses of funds.
2. Is information about cash flows more informative to users than information about working capital flows?
3. Briefly explain why comparative balance sheets and a cash flow statement are more informative than just comparative balance sheets.