If you were an accounting manager of a medium sized manufacturing company that makes technical parts for cell phones and computers, would you find a cash flow statement important - why or why not?
Cash flow statement is a statement which shows the cash inflow and cash outflow and it is most important for any organization to know that how much they are spending and in which are they are spending. In small organization it is not necessary to prepare cash flow statement because there are one or two person who control the whole cash and can track their spending very easily however in medium and large organizations it is very difficult to track their spending and specially in manufacturing company where various kinds of expenses incurred.
As an accounting manager it is very important for me to find cash flow statement that we can know that how much cash we can know these following details:
- How much cash we spent in making technical parts
- How much cash we spent in advertising
- How much cash is spent on labor/Material/overhead etc.
- How much cash we are generating from manufacturing of technical parts of cell phones
- How much cash we are generating from other than manufacturing
- How much ideal cash we have that we can spend
- How frequently we are receiving/making Payment form/to Debtors/Creditors.
There are more other reason that cash flow statement is important for the manufacturing unit.
I hope this clear your doubt.
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