Cash flow analysis is a valuable aid to the financial executive and creditors for evaluating the

uses of funds by the firm and in determining how these uses were financed. A cash flow
statement indicates where funds came from and where it was used during the period under
review. They are important tools for communication and Very helpful for financial executives in
planning the intermediate and financing of the Firm.

Cash flow statement is a statement of Cash flow. Cash flow signifies the movement of cash in
and out of a business concern. In flow of cash is a known as source out flow of cash is called use
of cash. The term cash here stands for and bank balance.

Cash flow Statement shows the changes in position between two balance sheet dates. It provides
the details in respect of cash generate and applied during the accounting period. The
Transactions which increase the cash position of the business are known as in flows of cash (Ex:
Sales of current and fixed assets, issue of shares and debentures etc.) The transactions which
decrease the cash position are known as out flows (Ex: Purchase of current and fixed assets,
redemption of debentures, and performance says and other long term depicts) Cash flow
statements constants on transactions that have a direct impact on cash. This statement depicts
factors responsible for such in flow and out flow of cash. In brief, cash flow statement
summarizes process of changes in cash position between dates of balance sheets. A cash flow
statement is like receipt and payments account in summary form.

The net flow cash is equal to net profit but this cannot be true in all cases because of the presence
of non-cash from operations certain adjustments are to be made to the net profit as disclosed by
profit and loss account.

There are three methods of determining cash from operations namely.

1. Cash sales method.

2. Net Profit/Net loss method.
3. Cash from operations: Cash sales – Cash purchases – Cash operating expenses.

NEED AND IMPORTANCE

.
1. To know about the future plans of the company depend upon the cashflow analysis of the
company.
2. This study helps in finding the comparison between the past and performance of the
company.
3. This study also helps up the goals and objectives for future in the content of cash flow
control.
4. This analysis to these statements will provide the decision maker to understand strengths
and weaknesses of the firm.
5. This analysis is important for the management and also for outside dealing with
organization is moving