Prepare a statement of cash flows using direct method for the year ended 31
2. Prepare a statement of cash flows using indirect method for the year ended 31Part two:After the experience from preparing the cash flow statement, answer the
1. What did you learn from the statement of cash flow that you prepared in terms of how to
evaluate the financial health of the company (discuss this from point of view of an investor,
an owner, a creditor)?(1 mark)
2. What is the relationship between profit and cash? Explain your answer.(1 mark)
3. It is relatively easy “to manufacture profit, but virtually impossible to create cash”. Discuss
this statement.(1 mark)
4. Why non-cash transaction important? Explain your answer.(1 mark)
5. The direct method of preparing the statement of cash flows is the easiest to understand, but
most companies use the indirect method. Why do you think this might be so?(1 mark)
6. A big number of countries requiring International Financial Reporting Standards (IFRS)
whereas some countries do not require companies to use IFRS and they follow the US.
GAAP. Discuss in details the differences between preparing cash flow statement according to
International Financial Reporting Standards (IFRS) and according to the US. GAAP
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