Question

128). What is Financial statement and cash flow analysis?

Answer 1

Answer :

Financial statement :

Financial statements are basically written records of business activities and performances of an organization. It is report prepared by company's management to show true and fair financial performance and position at a point of time. They are mainly prepared to provide information about company's finacial position to outside users of the company. Financial statements are main source of information for making decisions related to company.

There are mainly five types of financial statements, which are as follows :

1. Balance Sheet : It shows the balance of assets, liabilities and equity at the end of the period of time.

2. Income Statement : It shows company's revenues, expenses, and profit or loss for the period of time.

3. Statement of changes in equity : It shows the shareholders contribution, withdrawl and movement in equity.

4. Statement of cash flow : It shows the movement of cash inflow and outflow of business organization.

5. Notes to financial statements : It discloses all information which are relevant for users to understand.

Cash flow analysis :

Cash flow analysis is one of the important part of financial statement. Cash flow analysis is a study of movement of cash inflow and outflow of business organization. It helps us to understand better that where company's money is going and how much cash they have at any given time.

Cash flow analysis gives you a clear picture of businesses financial health. It is the evaluation of a company’s cash inflows and outflows from operations, financing activities, and investing activities.