What is the purpose of the statement of cash flows and what are some of its...

What is the purpose of the statement of cash flows and what are some of its major uses?

Expert Solution

Purpose of cash flows statement

Preparations of flows statement is mandatory for every organization. The main purpose of cash flows statement provide the information about the cash received and cash paid during the year. It also provide the information about cash position of business and change in cash position during the year. The purpose of cash flow statement provides the detail information how the cash in flow and out flow in the organisation . Cash received and cash paid divide into three category as operating activities, investing activities, financing activities. The cash flow statement prepares on the basis of cash accounting.

Uses of cash flow statement

Cash flows statement help in the planning of repayment of of loan and debts .it also provide help in capital budgeting decisions.

Cash flow statement help in the efficiently manage of cash in the business.It is an essential tool for short term financial analysis.

It also provides information to the outsider and invester about cash position and liquidity of business.

Cash flow statement main used in preparing cash budget and future need of cash in business.

ekkarill92 answered 2 years ago

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