Importance of taxes and return on investment in the cash flow statement

Importance of taxes and return on investment in the cash flow statement

Question

Do you think the cash flow from the sale of an investment should also consider the tax implications of the sale? Please explain.

Does the cash flow from the sale of an investment also need to consider the tax implications of the sale? Please explain.

Do you think that cash flow from investing activities should include not only the return on investment, but also the return on investment that is interest and dividend income?

Suppose a company increases the time it takes to pay its suppliers. What impact will this have on the cash flow statement? How sustainable is the change in cash flow from this practice?

Answer

Cash flow investments are created by companies investing in or disposing of long-term reserves. Examples of investing cash flows include payments for purchases of land, homes, equipment and other capital goods, and cash proceeds from sales of land, buildings, equipment and other capital goods. Although tax streams from the sale of investments are reflected in the financial statements, they are related to the way the investments themselves are operated and the transactions included in the cash balance can be divided into three categories: recurring transactions, expenses and funding. . Operating cash flow is derived from regular earning activities such as: B. Tax receipts and cash payments to cover expenses. For example, operating cash flow includes income from revenue and cash used to purchase goods to pay for operating expenses such as fees and services. Operating cash flows also include cash flows from debt, dividend interest and income taxes.

Cash flow financing is done by businesses that generate cash through loans or equity to repay their debts. Examples of cash flow financing include cash received from the issuance of credit products such as bonds and bonds; cash received from the issuance of common stock; Includes reimbursements or cash received from purchases. About government stocks. Cash flows related to asset adjustments can be identified in the statement of equity and cash flows related to long-term liabilities can be identified in the balance sheet through changes in long-term liabilities.

Return on investment Cash flows from investment activities should also be included. Dividends and interest income arise as a result of corporate acquisitions and represent cash flows from a company’s investing activities.

As the useful life of the liability increases, the cash flow from the activity increases. This can be a cheap source of funding, which is helpful for businesses, but it’s only a one-time step. Debt maturities should not be extended indefinitely, and too long a debt maturity can adversely affect a company’s creditworthiness.