Question
State the uses of cash flow statement.
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Answer
The uses of cash flow statement are as follows:
- It is useful for short term financial planning about inflows and outflow of cash.
- It helps in analysing the reason for the change in cash and cash equivalent balances of a company.
- It assists in determining and assessing liquidity and solvency positions of a company.
- It enables to analyse and study the trends of receipts and payments of cash from various activities of a company and thereby helps in drafting various policy measures and short term planning.
- It enables the segregation of cash flows from operating, investing and financing activities of the business separately.
- It assists in making decision about distribution of profit with reference to the availability of cash.
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