Cash hunt is the movement of bills and its equivalents. It includes the inflow and the outflow of interchange during a particular period. every proceedings which lead to increase in hard currency and notes equivalents ar categorize as inflows of exchange and all those transactions which lead to decrease in immediate payment and interchange equivalents are classified as outflows of property. Cashflow statement, therefore, is a statement that shows flow of cash and cash equivalents during period.
OBJECTIVE OF CASH FLOW STATEMENTS:
Cash menstruum statement is prepared with an objective to high light the sources and uses of cash and cash equivalents for a period. Cash flow statement is classified under operating activities and financing activities. It shows the net increase or net decrease of cash and cash equivalents under to each one activity.
USES OF CASH FLOW SATEMENT:
1. Short Term Planning. Cash Flow Statement gives information regarding sources and application of cash and cash equivalents for a specific period so that it becomes easier to plan investment, operating and fiscal needs of an enterprise.
2. Cash Flow helps to understand Liquidity and Solvency. Solvency is the force of the business to pay its current liabilities. Quartely or monthly cash flow statements help to as certain liquidity in a better way.
Financial institutions, like banks, mostly elect Cash Flow statement to analyse liquidity.
3. Efficient cash Management. Cash Flow Statement provides information relating to surplus or deficit of cash. An enterprise, therefore, can decide about the short circumstance investment of the surplus and can arrange short margin credit in case of deficit.
4. Prediction of sickness. Continuous cash deficit is an indication of sickness.
5. Comparative study. A Comparison of the cash flow for the previous year with the budgeted figures of the same year allow indicate as to what extent the cash resources of the business were generated and utilise according to the plan. It is, therefore...If you want to get a full essay, position it on our website: Orderessay
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