2. Important Parts of Cash Flow
● Initial Investment (spend at the beginning of the project)
● Operating Cash Flow (= Cash Receipts- Cash Payments)
● Terminal Cash Flow (cash inflows generated after the
completion of project)
3. Objectives
● To determine a project's rate of return or value
● To determine problems with a business's liquidity
● Act as an alternative measure of a business's profits
● To evaluate the quality of income generated by accrual
accounting
● To evaluate the risks within a financial product
4. Information required for the Cash Flow Analysis
Comparative Balance Sheets
Profit and Loss Account
Additional Data
5. ● Disclose the inward and outward movement
● It plays a vital role in short-term financial planning
● Help to management in formulating policies related to
internal financial management
● Supplemental to funds flow statement
● Better tool of analysis
Advantages of Cash Flow Statement
6. Advantages of Cash Flow Statement
● Reveals Success or Failure of Cash Planning
● Adds Efficiency to Cash Management
● Helps to determine the likely flow of cash
