How the cash flow statement may assists users of Financial Statement?

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Cash flow statement may assists users of financial statement in the following ways-
  • A cash flow statement when used in conjunction with the rest of the financial statements provides information that enables users to evaluate the changes in net assets of an enterprise, its financial structure and its ability to affect the amounts and timing of cash flow in order to adapt to changing circumstances and opportunities.
  • Cash flow information 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 enterprise.
  • It also enhances the comparability of the reporting of operating performance by different enterprises because it eliminates the effect of using different accounting treatments for the same transactions and events.
  • Historical information is also useful in checking the accuracy of past assessments of future cash flows and in examining the relationship between profitability and net cash flow and impact of changing prices.

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