Favorite Explain The Uses Of Cash Flow Statement
The importance of cash flow statement is that it is used to measure the cash position of the business ie.
Explain the uses of cash flow statement. The cash flow statement is an important document that helps open a wind interested parties insight into all the transactions that go through a company. A Statement of Cash Flows or Cash Flow Statement shows the movement in the Cash account of a company. Accountants follow the accrual basis in measuring income and expenses.
A projected cash flow statement can be prepared in order to know the future cash position of a concern so as to enable a firm to plan and coordinate its financial operations properly. The statement of cash flows presents the sources and uses of cash. The cash flow statement CFS measures how well a company manages its cash position meaning how well the company generates cash to pay its debt obligations and fund its operating expenses.
It provides useful information to the investors about the cash inflows and outflows. Net Present Value calculating the value of a. The inflow and outflow of cash and cash equivalents in the business for an accounting year and it also helps the business to know the availability of cash in their business.
The net increase decrease in cash reported on the statement of cash flows should reconcile the beginning and ending cash balances reported in the comparative balance sheets. A cash flow statement can play a crucial role in analyzing a businesss finances. Not only is it an important report for internal stakeholders but it can also help external ones like lenders and investors determine whether a company is successful and worthy of investment.
What is the Purpose of the Statement of Cash Flows. These inflows and outflows are further classified into operating investing and financing activities. The cash flow statement is an indicator of the liquidity of the firm.
Uses of Cash Flow Statement. A Cash Flow Statement is of primary importance to the financial management. Since a cash flow statement is based on the cash basis of accounting it is very useful in the evaluation of cash position of a firm.