A Statement Of Cash Flow

1746 Words7 Pages
STATEMENT OF
CASH FLOWS
Research conducted by Matthew Firth

CONTENTS

What is a statement of cash flow Page 3
What is the purpose of a statement of cash flow Page 3
How does a statement of cash flow effect business managers and shareholders? Page 4
The structure of a statement of cash flow explained Page 4
How to prepare a statement of cash flow Page 5
Example of a statement of cash flow Page 6
References Page 7

What is a statement of cash flow?

A statement of cash flow or cash flow statement is a detailed report that provides investors and shareholders with the correct information about cash inflows and outflows and the resulting change in cash and cash equivalents over a period of time. They are
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When a statement of cash flow is viewed along with the other financial statements, it provides information that enables users to evaluate the changes in net assets of an enterprise, its financial structure including its liquidity and solvency and its ability to affect the amounts and timing of cash flows in order to adapt to changing circumstances and opportunities.

Under the heading, Benefits of Cash Flow Information, the ministry of corporation affairs describes that, “Cash flow information is useful in assessing the ability of an organization to generate cash and cash equivalents that enables users to develop models to assess and compare the present value of the future cash flows of different companies” (Benefits of Cash Flow Information, Government of India). As a result of this the cash flow statement enhances the comparability of the reporting of operating performance by different companies because it eliminates the effects of using different accounting treatments for the same transactions and events. Consistency in financial statements year over year plays a large part in accounting as it allows management to easily compare the company’s performance.

How does a statement of cash flow effect business managers and stakeholders?

A statement of cash flow is an extremely important financial statement for management or external influencers to continually review. Current or potential shareholders like to see the liquidity of a
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