Question

What are some examples of real world cash flow statements for a company and what insights does the cash flow statement provide about a company's performance, in relation to other financial statements?

Answer 1

Cash flow statement of a company will be helping us in understanding about the cash surplus and the cash deficit of the company and cash is always the king as it is perceived in the business, so when the company will be having a higher amount of cash in its hands then the company will be having a better liquidity in its hands and they will be having a better debt repayment ability in its hands in short term and they will be able to make decisions themselves and they will also have a internal financing mode available with themselves.

So, it can be said that the cash flow levels will be providing the company with the highest amount of independence as it can be seen in the case of Apple as Apple is an American conglomerate and it is having a higher amount of cash in its hands and it is always capitalising upon the opportunities available in the market when it is having internal mode of financing available so it can even acquire company when it feels like and it can invest into projects itself and it can also have the flexibility of maximisation of the cash in adverse scenarios.

Lack of cash can be attributed to those companies Which have a financial distress problem in their hand as it can be seen in case of JCPenney who has a very low cash flow in its books of accounts and it had to ultimately file the bankruptcy and other companies who are suffering from cash crunch will be General motors along with General electric and these companies do not have adequate cash flows so these companies are suffering in order to pay their debt.

So, it can be said that the cash flow statement will be providing an independence and flexibility as well as low level of exposure to the risk to adverse economic scenario.