Question

State any two benefits of preparing 'Cash Flow Statement'. 

Answer 1

Benefits of Cash Flow Statement

1. Short-term Financial Planning- This statement is very advantageous for short-term financial planning. It helps in assessing and forecasting the sources and utilisation of cash and cash equivalents during a particular period.

2. Reasons for Change in Cash Position- It is possible that sometimes a company may have surplus cash even in case of lower profits or deficiency of cash in spite of higher profits. In such a situation, Cash Flow Statement helps in analysing the reason for the such change in the balances of cash and cash equivalents.