The efficiency of companies to generate cash to pay debts is measured through the cash flow statement.
The cash flow statement showcases the ongoing activities that generate revenue to support expenses thus
reflecting how well business fund operations and investments. To understand the efficiency of current
practices, appending activities and revenue generation, it is important to have accurate cash flow
statements. It is also of importance to the investors as they get to know if the business presents a higher
investment risk. The major elements of a cash flow statement are:
Operational activities, that include accounts receivable and payable, inventories, wages, income tax and
cash receipts Primary investment activities, that include the generation and use of investment earnings, asset sales,
issued loans or credit and payments from acquisitions or mergers
Secondary investment activities, that include fixed-asset purchases for equipment, office space or property
Financing activities, that include stock repurchases, payable dividends, debt repayments and issuance, cash
from investors and cash payments shareholders
Statement of shareholder equity
Though the balance sheet provides shareholders’ equity, but larger corporations maintain separate
statements for the same. These statements are known as statement of shareholder equity and these
include the amounts invested by key stakeholders and owners in a company. Apart from company stocks
and securities, a statement of shareholder equity also includes:
• Common and preferred stock sales and repurchases
• Purchased treasury stock, minus any reissued treasuries during the reporting period
• Retained earnings after subtracting dividends and losses
• Accumulated income, including incomes from unrealized capital gains, minus capital losses
