Answer the question

Question

What is the importance of understanding the preparation of the Cash flow Statement?

Answer 1

You need to understand the cash flow statement for the following reasons:

1. It helps you understand why profit and cash are not the same
2. It helps to know where the business generates its funds and where the funds are invested
3. It serves as the basis for cash forecast used for planning
4. It helps an entity to determine whether the current business is efficient in terms of cash flow from core operations