Question

Which statement is more important - the Income Statement or the Cash Flow Statement? Do we really need both? What does each statement tell us as analysts?

Answer 1

The Income statement and cash flow statement both are important for organization because both reports have there own important and necessary.

Income Statement : Income statement will show to us all the revenue and all expenses incurred during the period. This report will prepare on the basis of accrued. So all the income and expenses are taken in income statement whether it is received or not.

Cash Flow Statement: From the income statement we can know all income and expenses but this is on the basis of accrual so there is no actual cash flow on the basis of income statement. So we can overcome with this problem by preparing the Cash Flow Statement,

Cash Flow Statement will show all the cash movement in organization on the basis of operating, investing and financing basis.

So as per the above we needed both, income statement and cash flow statement.