Question

What are the objectives of preparing cash flow statement?

Answer 1

The various objectives of preparing cash flow statement are as follows

(i) The first and most important objective of cash flow statement is that it helps to ascertain the gross inflows and out flows of cash and cash equivalents from operating, investing and financial activities.

(ii) A cash flow statement helps in determining the various causes for change in the cash balances during an accounting period.

(iii) A cash flow statement is also prepared to determine the liquidity position of the organisation.

(iv) Moreover a cash flow statement is prepared to know about the requirement of cash in future.