Question

What are the objectives of preparing a Cash Flow Statement?

Hint:

Profit ≠ Cash. Cash Flow Statement converts accrual results into actual cash movements for better decisions.

Answer 1

Step 1: Explain the statement.
A Cash Flow Statement reconciles opening and closing cash/bank by classifying movements into Operating, Investing and Financing activities.
Step 2: Core objectives.
1) \emph{Evaluate liquidity}—ability to pay obligations and dividends. 2) \emph{Assess cash generation} from operations separate from investing/financing. 3) \emph{Facilitate decisions} on capital expenditure, financing mix and working-capital management. 4) \emph{Enable comparison} across firms/periods by focusing on cash rather than accrual profits.
Final Answer: \[ \boxed{\text{Inform about cash flows, judge liquidity, evaluate cash generation, and support planning/control}} \] % Quciktip