Discuss the statement of cash flows Values Limitations This relates to.docx
1. Discuss the statement of cash flows
Values
Limitations
This relates to Intermediate Accounting 2, Statement of Cash Flows Revisited, Chapter 21,
Intermediate Accounting 7th Edition, Spiceland, Sepe, Nelson.
Comment
Solution
2. Cash flow statement helps management in proper cash planning and maintaining matching
between cash inflows and outflows.
Value
1. Cash flow statement helps for appraisal of various capital investment
2. Cash flow statement helps management in proper cash planning and maintaining matching
between cash inflows and outflows.
3. Cash flow statement shows efficiency of a firm in generating cash flows from operations.
4.Cash flow statement reports the amount of cash used during the period in various long-term
investing activities, such as purchase of fixed assets.
5. Cash flow statement reports the amount of cash received during the period through various
activities
Limitation
1) Cash Flow Statement has limited scope when compared with Fund Flow statements as it
discloses inflows and outflows of cash alone. It does not reveal the overall financial position
2) Cash Flow Statement cannot provide a comprehensive picture of a financial position because
non-cash items of expenses and incomes are excluded.
3) The balance as disclosed by the cash flow statement may not be treated as actual liquid
position of a concern as it can be easily influenced by postponing purchases and other payments.