Purpose of the Statement of Cash Flows
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A cash flow statement is a financial statement that summarizes the amount of cash and cash equivalents entering and leaving a company. The cash flow statement measures how well a company manages its cash position, meaning how well the company generates cash to pay its debt obligations and fund its operating expenses.
Why Cash Flow Statement is Important? The cash flow report is important because it informs the reader of the business cash position. ... It needs cash to pay its expenses, to pay bank loans, to pay taxes and to purchase new assets. A cash flow report determines whether a business has enough cash to do exactly this.
The importance of cash flow statement is that it is used to measure the cash position of the business i.e. the inflow and outflow of cash and cash equivalents in the business for an accounting year and it also helps the business to know the availability of cash in their business.
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