Cash is often considered the pre-eminent asset, the ability to sustain growth, undertake opportunities and survive is dependent on the availability of cash
-. The cash flow statement provides additional data on liquidity and solvency.
- The cash flow statement shows additional information in relation to the Directors financial strategy.
- The cash flow statement can be considered to be more objective than the income statement as
accounting judgements relating to the matching and prudence principles are removed.
- It is possible to have too much cash, so third parties are interested how cash is being managed
- Share prices are influenced by the discounted projections of future cash flow to the shareholder,
such cash flows need to be underpinned by positive cash generation within the company. The cash
flow statement allows investors to improve their judgements on likely future cash flows in the
company