Is the information reported in the statement of cash flows used to determine changes in net income?

The information reported in the statement of cash flows is indeed relevant for understanding changes in net income, but it does not directly calculate it. The statement of cash flows shows how cash flows in and out of the company during a specific period, breaking down the cash flows into operating, investing, and financing activities.

Net income is derived from the accrual-based income statement, taking into account all revenues and expenses, not just cash transactions. However, the statement of cash flows provides critical insights into the actual cash generated from operations which is connected to net income because it helps in assessing how effectively a company can convert its net income from the income statement into cash.

Using the cash flow information, decision-makers can analyze how operational cash flows relate to earnings, ensuring that the company is not just reporting profits but is also generating enough cash to support its operations and growth. Therefore, while net income and cash flow are related, it is important to note that the direct calculation of net income does not occur in the statement of cash flows itself. It provides a complementary view that is essential for effective financial analysis.