How is the statement of cash flows usefulnand who is likely use this statement?

Expert Solution

The cash flow statement or statement of cash flow is an indicator of a business cash inflow and outflow. It breaks down these cash flows into three categories: operating activities, investing activities, and financing activities.

Following are some uses of Cas Flow statements:-

To evaluate the cash position of a firm
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.
Cash flow statement helps in planning the repayment of loans, replacement of fixed assets and other similar long-term planning of cash.
Cash flow statement provides information of all activities classified under operating, investing and financing activities.

Now as far as who is likely to use cash flow statements it can be used by following:

By any Business entity to know the cash position of the business as explained in above bullets.
It can be used by Financial Institute like Banks or Investing companies to evaluate the financial viability of its customers or any investing opportunity.
By shareholders of the company as it shows the financial strength of the company.

Hope the above answer gives you an understanding of cash flow statements.

ekkarill92 answered 1 year ago

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