Question

*Summarize your understanding of the statement of cash flows.

*Write a short article (250 words) for a local business publication in which you explain why cash flow from operations is important information for small business owners.

Answer 1

Statement of cash flow is an important component of Financial statements of the oragnisation which need to be presented to the sharehoders as well as need to be part of Audited financial statementsand is major driver in planning and forecasting the organisations future cash needs and the source of their financing, it shows us the cash flow from different activities like

1. Cash flow from Operating activities, which shows us how well the company is carrying out its opertaions.

2. Cash flow from Investing activities, which give brief idea about companies investment strategies.

3. Cash flow from Financing activities, which shows how company is managing its finance structure.

Also the cash flow statement is important for small business owners as they have to keep a close watch on how the business is being operated and what are the major sources of cah inflow and utflow for the business and how it can meet the future working capital needs of the business so as to meet all their future liabilities out of cash inflow from the business operations.