Explaining the purpose of the cash flow statement

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Reference no: EM13143773

Renee Ashay is the sole proprietor of Renee's School of Cosmetology. Renee intends to expand her course curriculum to include an esthetician program (skin care). Renee must hire a certified instructor, purchase a line of skin care products, purchase additional equipment, and promote the new program. In order to secure a loan to finance her expansion, Renee's banker asked her for a complete set of financial statements, including a cash flow statement. Renee is able to prepare her accrual-basis income statement, statement of owner's equity, and balance sheet from her trial balance. However, she has come to you because she is unfamiliar with the statement of cash flows, and does not understand the need for this statement. Prepare a letter to Renee explaining the purpose of the cash flow statement and why the banker is interested in this financial statement.

Reference no: EM13143773

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