Question

List any three features of a 'Cash Flow Statement'.

Hint:

A Cash Flow Statement tracks cash movements and is divided into operating, investing, and financing activities.

Answer 1

Concept: A Cash Flow Statement is a financial statement that records the inflow and outflow of cash and cash equivalents during an accounting period. It helps users understand how a business manages its cash position.
Step 1: Shows cash inflows and outflows. It records all sources and uses of cash, including receipts from operations and payments for expenses, investments, and financing activities.
Step 2: Classified into three activities. The statement is divided into:

• Operating activities (core business operations)
• Investing activities (purchase/sale of assets)
• Financing activities (issue of shares, loans, dividends)

Step 3: Indicates liquidity and solvency. It helps assess the ability of a business to meet short-term obligations, maintain operations, and plan future investments.
Conclusion: A Cash Flow Statement is essential for evaluating the financial health and liquidity of an enterprise.