Advantages of Cash Flow Statement

 Advantages of Cash Flow Statement

Advantages of Cash Flow Statement

            1. It provides information about an enterprise’s liquidity, flexibility and ability to generate future cash flows, which is critically important to survival and successful growth.

            2. It can provide information about an entity’s ability to meet its obligations they become due.

            3. It enhances the comparability of the reporting of operating performance by different enterprise because it eliminates the effect of using different accounting treatments of the same transactions and events.

           4. It helps to assess the reliability of the amount of net profit.

         5. It can account for difference between net profit and cash flow from operating activities.

          6. The statement enables user to assess why assets and liabilities are increase or decrease during an accounting period.

      7. It can provide information concerning cash and non-cash, investing and financing transaction during the accounting period.

          8. It will help in assessing likely future financing needs.

         9. It will help in assessing the effect of major events such as issue of shares or acquiring another business on the liquidity of the business.