Question

A cash flow statement is useful for __________.

• A. Short-term planning
• B. Long-term planning
• C. Medium term planning
• D. None of the above

Answer 1

The correct option is A Short-term planning

A cash flow statement is a statement which shows changes in the cash position of an organisation between two periods. As it consists of two periods it basically consists of short period. Because if prepared for long period the estimation of cash values from various activities will not give accurate outcomes leading to less effective planning and decision making. Hence, it is useful for short-term planning.