Reference no: EM132751326

Single Corporation is one of the prominent and fastest-growing technology consulting firm based in Sydney, Australia. This company has clients mainly from Asia and Europe. In 2019, this company appointed Miss Zara Wang as the CEO of Single Corporation to look after the business. Zara has appointed you as the company's chief financial officer (CFO) to look after the company's financial matters and help Zara to make strategic decisions. As per the Corporation Act 2001, this company is required to comply with Australian accounting standards. Hence, Zara called for a business meeting with you to discuss the financial compliance matters with you. As a CFO, you have advised the Zara that to comply with accounting standards, the company is required to prepare a complete set of financial statement which includes a statement of financial performance, statement of change of equity, statement of financial position, statement of cash flows as well as notes to the accounts. The CEO (Zara) questions the usefulness of the cash flow statement as she has stated that all she needs to know is if the company has made a profit and has a healthy balance sheet. However, Zara has asked you to prepare a full set of financial statements including the statement of cash flows. After you prepared the cash flows statement, it revealed a poor cash position, whereas the statement of financial performance was showing a profitable result for the year. The CEO (Zara) restated her opinion that the cash flow statement did not give a good indication of the activities of the company. Zara also heavily depends on statement of financial position and statement of financial performance to make most of her business decisions.

Problem 1: Prepare a response to Zara (CEO) explaining the purpose and usefulness of the cash flow statement and why it can report a negative cash flow position while the company is making a profit.

Problem 2: Write a report to Zara (CEO) about the limitations of the statement of financial position and the statement of financial performance as a source of information for users of general-purpose financial statements (discuss at least two major limitations for each statement in your report).