Importance Of Cash Flow Statement

The cash flow statement provides information regarding inflows and outflows of cash of a firm for a period of one year. Therefore cash flow statement is important on the following grounds.

1.Cash flow statement helps to identify the sources from where cash inflows have arisen within a particular period and also shows the various activities where in the cash was utilized.

2. Cash flow statement is significant to management for proper cash planning and maintaining a proper matching between cash inflows and outflows.

3. Cash flow statement shows efficiency of a firm in generating cash inflows from its regular operations.

4.Cash flow statement reports the amount of cash used during the period in various long-term investing activities, such as purchase of fixed assets.

5. Cash flow statement reports the amount of cash received during the period through various financing activities, such as issue of shares, debentures and raising long-term loan.

6. Cash flow statement helps for appraisal of various capital investment programs to determine their profitability and viability.

Related Topics
Concept And Objectives Of Cash Flow Statement
Preparation Of Cash Flow Statement
Concept And Determination Of Cash Flow From Operating Activities
Cash Flow From Investing Activities
Cash Flow From Financing Activities And Its Determination


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