Question

What is a cash flow statement?

Answer 1

1. A cash flow statement is a statement showing changes in cash position of the firm from one period to another.
2. It explains the inflows (receipts) and outflows (disbursements) of cash over a period of time.
3. Inflows of cash may occur from sale of goods, sale of assets, receipts from debtors, interest, dividend, rent, issue of new shares and debentures, raising of loans, short-term borrowings, etc.
4. Cash outflows may be on account of purchase of goods, purchase of assets, payment of loans, loss on operations, payment of tax and dividend, etc.
5. A cash flow statement is different from a cash budget.