Dear Michi,

Thank you for your twelfth message.  My comments follow.

Sincerely,

Prof. Sue Garreis

 

Dear Professor Garreis,

Thank you for your reply and corrections of my English.

I will answer your last questions.

 

《 Homework 》

1. Why is the Statement of Cash Flows important to U.S. users of accounting information?

　　　 →　The casn flow statements are very important for creditors and for stockholdets.

　　　 →　The generation of the company's cash affects creditors and stockholders greatly.

　　　 →　Because most of the dividends are paid in cash, the stockholder examines cash to predict the soundness of thecompany.

True!

→　In addition, the creditors look closely at cash because their loans to the company will be paid back in cash.  Creditors want to avoid bad loans.

2. Look at the table that compares the direct and indirect methods.
　What is the main difference between the indirect and direct methods:
　　a. in operating activities?
　　b. in investing activities?
　　c. in financing activities?

　　→　a.　 In a business activity, the difference of a direct method and the indirect method is an item displayed on financial statements.
　　→　The direct method is items such as an operating revenue and raw materials,
the operating expenses are displayed.
　　→　In addition, as for the direct method, connection with the balance sheet is clear.

Yes, this is a strong advantage of the direct method.

→　The indirect method begins with the net Net Income of income statements, and the items such as depreciation and amortization or the loan loss reserve are displayed.
In addition, the indirect method coordinates the Net Income.

Correct!

　　→　b.　 In investment activities, there is no difference.

Correct!

→　c.　 In financing activities, there is no difference.

Correct!


3. How do Japanese companies report their changes in cash during the year?

　　→　The Japanese company reports a change of the cash by cashflow statements.
In Japan, they use indirect method.

Correct!


4. How easy was this lesson for you?

　　→　The accounting was somewhat hard.
　　→　The English was about right.
　　→　Getting to and using the linked web pages was somewhat easy.

Thank you for your feedback.


I'm waiting for your reply.

Sincerely, yours

Michi


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