Question

State the objectives of the cash flow statement.

Answer 1

• A cash flow statement aims at highlighting the cash generated from operating activities.
• It is useful in planning the replacement of an asset, repayment of a loan, etc.
• It is very useful in evaluating the cash position of an enterprise.
• Banks and financial institutions mostly prefer the cash flow statement to analyse the liquidity of the borrowing firm.
• It is useful in assessing the ability of the enterprise to generate cash and cash equivalents and enables users to develop models to assess and compare the present value of the future cash flows of different enterprises.