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. Identifying The Sources Of Cash Inflow And Outflow
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. Better Cash Planning
Cash flow statement is significant to management for proper cash planning and maintaining a proper matching between cash inflows and outflows.
3. Showing The Firm's Efficiency
Another importance of cash flow statement is that it shows efficiency of a firm in generating cash inflows from its regular operations.
4. Reporting Of Long-term Investment
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. Reporting Of Financial Activities
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. Therefore, cash flow statement is important to know entire financial activities of the business firm.
6. Appraisal Of Capital Investments
Cash flow statement helps for appraisal of various capital investment programs to determine their profitability and viability.
1. Identifying The Sources Of Cash Inflow And Outflow
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. Better Cash Planning
Cash flow statement is significant to management for proper cash planning and maintaining a proper matching between cash inflows and outflows.
3. Showing The Firm's Efficiency
Another importance of cash flow statement is that it shows efficiency of a firm in generating cash inflows from its regular operations.
4. Reporting Of Long-term Investment
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. Reporting Of Financial Activities
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. Therefore, cash flow statement is important to know entire financial activities of the business firm.
6. Appraisal Of Capital Investments
Cash flow statement helps for appraisal of various capital investment programs to determine their profitability and viability.