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