Is cash flow important to the success of a business? Why or why not? What financ

Question

Is cash flow important to the success of a business? Why or why not? What financial statement can help us understand a company’s cash flow? Is cash flow important to the success of a business? Why or why not? What financial statement can help us understand a company’s cash flow? Is cash flow important to the success of a business? Why or why not? What financial statement can help us understand a company’s cash flow? Is cash flow important to the success of a business? Why or why not? What financial statement can help us understand a company’s cash flow?

Explanation / Answer

Cash Flow Statement is very important to an organisation and it is one of the financial statement should be prepared and audited along with Profit & Loss account and Balance Sheet.

Cash Flow statement analyses three kinds of activities namely operating activities, financing activities and investing activities.

Inflows and outflows of each activities are segmented seperately and reported in the cash flow statement.

By the statememnt of cash flows the flows of cash will be known and it will help the organisation to plan accordingly to avoid the liquidity issues.

Cash Flow Statement is important tool to analyse the cash flows, how the cash is distributed among its operations, finance and investment activities.

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