Legal Dictionary
Cash Flow Statement
Also known as statement of cash flows, is a financial statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents, and breaks the analysis down to operating, investing and financing activities.
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Frequently Asked Questions
What are the three main activities reported in a law firm's cash flow statement?
A law firm's cash flow statement typically reports three main activities: operating activities (e.g., cash generated from legal services), investing activities (e.g., cash used for purchasing office equipment), and financing activities (e.g., cash obtained from loans or equity investments). These activities help lawyers analyze the firm's cash flow sources and uses.
How can a cash flow statement help lawyers assess a law firm's financial health?
A cash flow statement provides lawyers with a clear picture of a law firm's cash inflows and outflows. By analyzing the statement, lawyers can evaluate the firm's ability to generate positive cash flow, manage expenses, and meet financial obligations. It helps identify potential cash flow issues, assess liquidity, and make informed decisions to maintain the firm's financial health.