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STATEMENT ANALYSIS
Purpose of a statement of cash flows:
• To provide information about the cash inflows and outflows of
an entity during a period.
• To summarize the operating, investing, and financing activities
of the business.
• •Cash
Essentially, the cash flow
flow information statement
is useful is concerned
in assessing withofthe
the ability theflow
of cash into
enterprise and out of the
generate cashbusiness.
and cashThe statement
equivalent. captures
It also
both thethe
enhances current operatingof
comparability results and the accompanying
the reporting of operating
changes in the
performance balance sheet.
by different enterprises because it eliminates the
effects of using different accounting treatments for the same
transactions and events.
People and groups interested in
cash flow statements include:
• Accounting personnel, who need to know
whether the organization will be able to
cover payroll and other immediate
expenses.