Financial statement analysis can help us determine why a company's cash flows are increasing or decreasing

Question

Quizplus · Accepted Answer

Financial statement analysis can provide insights into a company's cash flows by examining its income statement, balance sheet, and cash flow statement. By looking at trends in revenue, expenses, assets, liabilities, and cash inflows/outflows, analysts can identify the reasons behind changes in a company's cash position. For example, if a company's cash flows are decreasing, analysis may reveal that the company has experienced a drop in sales, increased expenses, or is investing heavily in long-term assets. Conversely, if cash flows are increasing, analysis might suggest that the company has improved revenue generation or found ways to reduce costs. Overall, financial statement analysis is a valuable tool for understanding a company's financial health and making informed investment decisions.

Financial Statement Analysis Can Help Us Determine Why a Company's