The most vulnerable area for any enterprise is "Liquidity". The most successful business in terms of profits and income may gone through Bankruptcy; just because it won't have ability to meet its liabilities and this may be because of bad cash/liquidity management.
Therefore, its very important to keep an eye over this aspect of the business and Cash Flow Statement is one of the many tools to do so. Cash Flow Statement, in summary, shows the sources and utilization of cash resources of the business; thus helping CFO's to plan and react according to the situation. It also gives us the real information about the ending cash balances.
A Cash Flow Statement consists of three categories/activities:
- Operating Activities
- Investment Activities
- Financing Activities
The video presentation below will surely help you grasp the importance of Statement of Cash Flow:
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