Question

what are the benefits of the statement of cash flow and income statement?

Answer 1

Advantages of cash flow statements

1.They help in providing the actual cash position / Liquidity position of the company.

2. Cash being the basis of financial operations, the management can plan and control financial operations properly with the help of projected cash flow statement.

3.Cash flow analysis and ratio analysis together help in determining the financial position and profitablity of the company.

4.As liquidity position is known, any short fall can be arranged for, or any excess can be used for the growth of the company.

5.Cashflow statement helps the internal financial management as its useful in formulation of financial plans.

Advantages of Income Statement:

1) For any investor, the income statement is very necessary to decide, whether he should invest in the company or not as the income statement is detailed with regards to sales,profit, operational efficiency and the other non-operational aspects too.

2)Incomestatement shows the profitablitiy over a period of time.Income statement follows matching principle and shows the expenses incurred to earn the revenues.

3)Income statement provides detailed information on revenues. Taking from Cost of goods sold , to all the operational expenses,taxes, revenues from non operational components etc.

4)It helps the company in analysing its expenses, and consider the major operating revenue generating areas.

4)