Importance of Cash Flow Statement

Utility of cash flow analysis is same as cash flow statement. It is desirable for finance managers to deal with this subject.It mostly deals with accounts and finance managers of organisations. It comes into lime light when organisation comes to profit. Irrespective of gain or profits finance managers looks at cash balances of organisation.

There may be increase of cash balances or decrease of cash balances.Finance manager aims to investigate the reason of it. They look for reasons and then search for different processes to increase or decrease the level of cash balances inside organisation levels.

By investigating all of these possibilities it looks at various levels and prepare for futuristic decision making, process and aims to increase cash flows into organisation. They calculate how much cash is the most comfortable cash level so that they prepare to increase or decrease cash balances that comes into or goes after organisation.

They look at how much cash reserve is there and how much to add into organisation. Whether these comes from external resources or comes from internal resources they think about it in detail. If it is from external resources then what types of instruments and opportunities need to add into organisation.

Those instruments must take into consideration about organizational resources and available instruments considering that will not impact any financial emergencies into organizational levels. In this way, it helps immensely for decision-makers to look deep into the organizational capacity to seek through what are available resources that they can cope with in the case of such impending emergencies.

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Only inflow and outflow of cash are looked into. From time to time at different intervals, the process of cash balance and cash position comes under absolute investigation. It is for short term planning and that is why liquid asset ration of the organization is taken into consideration.

It deals with cash flow and that is real so it provides one of absolute understanding of how organization running with cash standards and the movement of cash from one side to the other is completely visible with it.

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