The major limitations or disadvantages of cash flow statement can be described as follows:
1. Limited Scope
Cash flow statement has limited scope because it cannot reveal net income from operation.
2. No Complete Information
Cash flow statement cannot show the complete and up-to-date financial position of the firm.
5. Ignores Non-cash Items
3. Chance Of Inaccuracy
It may provide wrong information if there is wrong data in the balance sheet.
4. Ignores Accounting Concept
Cash flow statement ignores accrual concept of accounting.
Also Read:
True net income cannot be obtained because cash flow statement ignores non-cash items.
6. Historical Data
It uses historical financial data from balance sheet and income statement. So, it may not be suitable for future forecasting and financial planning.
