 In this discussion, we will discuss the discussion question of discuss the uses for the statement of cash flows. If we see a discussion question like this or an essay question like this, we may think we don't know exactly where to start or exactly what they're asking for. Support accounting instruction by clicking the link below, giving you a free month membership to all of the content on our website broken out by category further broken out by course, each course then organized in a logical reasonable fashion, making it much more easy to find what you need than can be done on a YouTube page. We also include added resources such as Excel practice problems, PDF files and more like QuickBooks backup files when applicable. So once again, click the link below for a free month membership to our website and all the content on it. And if that's the case, then we could start with just what the statement of cash flows is what are the components of the statement of cash flows. And then hopefully that could pick up some answers there and then expand on that how it could be used for. So of course, the statement of cash flows is one of our major financial statements. It's going to be a financial statement included with the balance sheet, the income statement, the statement of equity. The statement of cash flows will report the cash flows and it's going to have three major categories to do so operating activities, investing activities, financing activities. So how could this be useful? Why would we need this statement? Why in other words, we could think, why isn't the balance sheet income statement and statement of equity enough? Why do we need this statement in addition to it? Why do we need the statement of cash flows? Well, the balance sheet and the income statement balance sheet tells the story of where we are at. The income statement tells us the story of what happened. The balance sheet gives us an idea of cash, but it only gives us an idea of what cash is at the end of the time period at a point in time. The income statement gives us the story, the activity of what is going on, but it gives the story of what's going on in terms of an accrual basis, what is actually happening in terms of revenue being earned on an accrual basis, revenue recognition, in terms of expenses that we have incurred in terms of the matching principle. But it doesn't tell the story in terms of cash flow, what the cash flow happened. And that's going to be really important for us to have the cash flow because the cash flow is going to be something that's obviously very necessary for the flow of the business to continue in the future. And we know that the cash flow affects every area within the company. So if we have information about the cash flow, we know that that affects every cycle within the company as well. So although the income statement is really important to tell the story in terms of the activity that's happening on an accrual basis, and that gives us a more accurate picture of what is going on, we also want to see the story in terms of a cash basis so we know what's happening in terms of the cash flow. That's going to be important. We could think of that being important by who uses the financial statements in terms of internal users and external users. So if we're thinking about internal users, we're thinking about people making decisions when within the company management, if we're thinking about external users, we're typically thinking about people, investors in the company, and they have different goals that the internal users want to make sure that we have enough information management. In other words, wants to make sure that we have enough cash flow in order to continue with operations, they're going to want to know where the cash, the major cash flow sources are happening within the company so that they can manage the cash flow. Remember, our job on the management side isn't necessarily to just increase cash flow overall. Our goal is to increase value, to generate revenue, to generate value in the company. So sometimes we might think that our goal is to just increase and increase cash flow, and it is in a sense, but really what we're trying to do is create value. If we have a lot of cash, if we have a lot of cash inflow, then it could create value by us giving some of that cash to the owners in terms of dividends or something like that. So just holding cash isn't really the goal of the company. If we have a lot of cash, we would like to be making money on the cash, investing that cash somewhere, getting a return on the cash, putting that cash back into the company. But at the same time, we want to make sure that we have enough cash flow to pay off our current obligations that will be becoming due soon. So just managing that cash flow in order to be in a situation that we can create the most value in the company and generate the value of the company is going to be one of the uses for the internal uses of the statement of cash flows. The external users of the statement of cash flows want to determine the health of the company, how well is the company doing, and of course cash flow is going to be important for that as well. So they're going to determine, can this company pay off its current obligations? Are they handling their cash flow well in order to create value? And the investor, of course, is looking for the creation of value in terms of the company creating value to go up in value, so the stock price will go up in value, as well as hopefully cash flow going up so that they can in the future get dividends, get paid as the owner of the company if they invest within the company. So that's going to be some of the uses for the statement of cash flow and some of the added value that the statement of cash flow is going to give over and above the balance sheet, the income statement, the statement of equity.