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Category :
Finance | This
query is : resolved |
author :
Payal Gupta
Posted On
04 July 2012
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Dear Sir
Earlier I was doing my project on the fundamental analysis in equity markets but this topic requires more time to understand. Thats why now I am doing the analysis of Dreamweavers, where I am doing my training.
Sir I have question regarding cash flow statement. Cash flow statement only tells us the cash inflow and outflow so it tells us the position of cash in hand with the company and hence its liquidity.
we analyse the liquidity position with ratios and with the help of cash flow statement. Is there any difference in the two. I mean to say if I don't have the cash flow statement and only calculate liquidity ratios then is ratios enough to analyse the liquidity position.
If yes, what is the other use of cash flow statement. We normally say that we require three statements b/s, income statement and cash flow statement for the analysis.
Regards
Payal |
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Expert :
Amresh K Srivastava
Posted On
04 July 2012
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Dear Payal
Please understand these things
1. What is Cash Flow?
Cash Flow Statement is a 'flow' statement.
It indicates changes that took place between two successive Balance Sheets. The statement of cash flows provides a thorough explanation of the changes that occurred in a firm's cash balance during the entire accounting period. The statement of cash flows reports cash receipts and payments of a company during a given period for operating, financing, and investing activities.
2. Why do we need CFS as financial reporting?
Balance Sheet & P&L A/c is not sufficient in term of pure financial Reporting. Cash Flow shows the relationship of net income to changes in cash balances.
It reports past cash flows as an aid to: 1. Predicting future cash flows
2. Evaluating the way management generates and uses cash
3. Determining a company's ability to pay interest and dividends and to pay debts when they are due
Further it identifies changes in the mix of productive assets. The statement of cash flows, along with the income statement, explains why balance sheet items have changed during the period.
Thats why there is legal rules to provide the cash Flow statement in prescribed format.
Best of Luck
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author :
Payal Gupta
Posted On
05 July 2012
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Thankyou Sir, the concept is more clear now.
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