Cash Flow Statement

A Cash Flow Statement is a financial report that provides a detailed summary of cash and cash equivalent transactions during a specific accounting period. It reflects how cash is generated and used through core operations, investments, and financing activities. By segregating cash movements into operating, investing, and financing sections, the statement enables businesses to track liquidity, understand the timing of cash inflows/outflows, and assess financial flexibility. It is vital for ensuring that the business maintains sufficient cash for its immediate and short-term obligations.

🎯 Objectives:

• To monitor liquidity position and ensure availability of cash.
• To evaluate the cash-generating ability from core operations.
• To help in planning short-term financial needs and obligations.
• To assess investment and financing decisions.
• To provide stakeholders with transparent cash flow reporting.
• To comply with statutory requirements under AS-3 / Ind AS 7.

Important to Users:

• Management: Helps manage day-to-day cash and short-term obligations.
• Investors: Evaluates company’s ability to pay dividends and reinvest.
• Creditors: Assesses capacity to repay loans and interest on time.
• Employees: Indicates timely payment capability for salaries and benefits.
• Government: Ensures transparency in financial operations for compliance.
• Shareholders: Reflects company’s financial strength and sustainability.

Different Methods:

• Direct Method: Shows actual cash receipts and payments during the period.
• Indirect Method: Starts with net profit and adjusts for non-cash items.