Cash Flow Statement


Preparation of Cash flow StatementA cash flow statement, also known as the statement of cash flow is a financial report depicting amount of incoming and outgoing money during a particular time period. The statement does not include non-cash items like depreciation, thus making it useful for determining the short-term ability of a company to meet its liabilities .


It summarizes the company's cash receipts and cash disbursements over a period of time. It also lists cash to and cash from operating, investing, and financing activities, and also the net increase or decrease in cash for a particular period.


Advantages of a Cash Flow Statement


  • Helps the company to know whether it will be able to cover payroll and other immediate expenses
  • Helps the lenders to know the company's ability to repay
  • Helps the investors judge whether the company is financially sound
  • Helps the newly formed companies to know their inflow and outflow of cash and thus prevent cash shortage






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