The main benefits or advantages of cash flow statement can be studied as follows:
1. Cash Inflow And Outflow
Cash flow statement reports about cash inflow and cash outflow and discloses the change in cash balances between two balance sheets.
2. Cash Forecast
Cash flow statement helps to identify future cash need by revealing current cash position. It helps the management to forecast future cash flow.
It presents current cash position which helps to ascertain solvency, profitability and liquidity position of the business.
4. Financing Decision
Management can make different financing and investment decisions with the help of cash flow statement.
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5. Financial Planning
It helps the management to formulate financial plans.
6. Capital Budgeting Decisions
Capital budgeting decisions are taken on the basis of projected cash flows.
7. Prevents Mismanagement Of Cash
Cash flow statement prevents mismanagement of cash in the business firm.
