Objective of Cash Flow Statement

Accountancy Theory September 01, 2020

Objective of Cash flow Statement

A cash flow statement is provides the basis for evaluating an enterprise’s cash flows. The statement shows the impact of Operating, Investing and Financing activities on cash. In order for a business to survive, the ability to make profits may be enough. It is also importance for the business to generate sufficient cash for the survival. Businesses must great attention to liquidity as well as profitability if they are to succeed.

Negative cash flows for more than one accounting period is a strong sign of potential problems than can effect enterprise’s operation as well as financing and investing activities. Therefore, cash flow statement is extremely useful for proper financing planning and control.