Question

n summation of your discussion, the statement of cash flows provides a great deal of information. The information includes cash receipts of an organization, cash payments an organization makes as well as the net change in cash from operating activities, investing activities and financing activities. This information provides for a period and is time formatted in such a way that the beginning cash balances are reconciled with the ending cash balances. The Statements of cash flows have the important task of providing information about the financial strength of an organization, and there are several types of financial information that can be determined by scrutinizing the statement of cash flows that can help investors, creditors, and other user's asses the financial strength. Based on your assessments of the statement of cash flow, does it show the organization’s ability to generate cash flows in the future?

Answer 1

Yes.

The Cash Flow Statement shows the organisation's ability to generate cash flows in the future.

The Cash Flow Statement is a financial statement. It reveals the changes in cash position between two balance sheet dates. The cash flows are classified into three main categories :

(1) Cash Flows from Operating Activities

(2) Cash Flows from Investing Activities

(3) Cash Flows from Financial Activities

Cash Flow Statement is a tool of financial analysis. It is more useful for short term analysis and cash planning. It is prepared by taking into consideration the inflows and outflows in terms of operating, investing, and financial activities. The net difference represents the net increase or decrease in cash and cash equivalents.

A Cash Flow Statement shows the future cash position of a concern. Through this statement, the firm can know/understand

• how much cash it can generate and
• how much cash will be needed to make various payments.

It provides information regarding the sources und utilisation of cash during a particular period, so it is easy for the management to plan carefully for the cash requirements in the future and preparing cash budgets properly.