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Statement of cash flow and its purposes

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The statement of cashflows is one of the basic financial statements mandated by GAAP but is also an important topic in managerial accounting. Why do you think that is? Provide an argument for the statement of cashflows as a managerial technique.

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Solution Summary

The answer contains the meaning,contents and the purposes of cash flow statement.

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Statement of cash flow shows the movement of cash from operating, investing and financing activities of the company. It shows the short term solvency of the company. It shows the company's flow of cash both inflow of cash and cash equivalents and outflow of cash and cash equivalents. Cash flow statement is one of the basic financial statements mandated by GAAP.
Argument for the statement of cash flows as a managerial technique
Cash flow statement shows the ability of the firm to be solvent in the short term. Cash flow statement is a managerial technique in the sense it helps the management to ...

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