why is the cash flow statement indispensable?

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As per IAS 7, all entities that prepare financial statement in conformity with IFRS are required to present a Cash Flow Statement or simply Statement of Cash Flow.

Cash Flow Statement is an additional information provided to the users of accounts in the form of an statement, which reflects the various sources from where cash was generated (inflow of cash) by an enterprise during the accounting year and how these inflows were utilised (outflow of cash) by the enterprise.This helps the users of accounts:

a) To identify the historical changes in the flow of cash & cash equivalents.

b) To determine the future requirement of cash & cash equivalents.

c) To assess the ability to generate cash & cash equivalents.

d) To estimate the further requirement of generating cash & cash equivalents.

e)To compare the operational efficiency of different enterprises.

f) To study the insolvency and liquidity position of the enterprise.

g) As an indicator of amount, timing and certainty of future cash flows.

h) In examinig the relationship between profitablility and net cash flow.

ekkarill92 answered 1 year ago

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