why is the cash flow statement indispensable?

Expert Solution

Ans:

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

why is the income statement a poor gauge of cash flow and how does the cash...

why is the income statement a poor gauge of cash flow and how does the cash flow statement address this problem with the income statement?

When it comes to the Statement of Cash Flow. Why is it important to identify the...

When it comes to the Statement of Cash Flow. Why is it important to identify the three cash flows (operating, financing & investing) seperately?

Question 1: Statement of Cash Flows The statement of cash flow reports cash flow amounts including...

Question 1: Statement of Cash Flows The statement of cash flow reports cash flow amounts including 1) operating cash flow, 2) investing cash flows, and 3) financing cash flows. REQUIRED: Describe the corporate strategy of a company that has a positive operating cash flow, an investing cash flow that is negative, and a financing cash flow that is positive. Question 2: Common-Size Balance Sheets Analyzing common-size balance sheet for assets. Please open the attachment “Common-Size Assets”. Three companies are shown...

what is on cash flow statement?

What is cash flow statement?

Discuss the cash flow statement.

Statement of Cash Flows The Statement of Cash Flows (also referred to as the cash flow...

Statement of Cash Flows The Statement of Cash Flows (also referred to as the cash flow statement) is one of the three key financial statements that report the cash generated and spent during a specific period of time (e.g., a month, quarter, or year). The statement of cash flows acts as a bridge between the income statement and balance sheet by showing how money moved in and out of the business. Three Sections of the Statement of Cash Flows: Operating...

2. In developing the cash flow statement, why is depreciation added back to operating cash flows...

2. In developing the cash flow statement, why is depreciation added back to operating cash flows and to fixed assets?

On a Statement of Cash Flows, free cash flow (i.e. the cash flow available for debt...

On a Statement of Cash Flows, free cash flow (i.e. the cash flow available for debt service and payments to equity holders) can be found by: none of these answers by subtracting Cash Flows from Investing Activities from Cash Flows from Operating Activities looking at Net Cash Flow, at the bottom of the Statement of Cash Flows subtracting Cash Flows from Investing Activities from the sum of Depreciation and Amortization looking at Cash Flows from Operating Activities

ACC II - Cash Flow Statement week 5 What does a Cash Flow statement offer a...

ACC II - Cash Flow Statement week 5 What does a Cash Flow statement offer a company that the Balance Sheet, Income Statement and Retained Earning Statement can not?

Question