Why is Cash Flow or Fund Flow Statements so important?

No Cash, No Comforts in Life! Money can’t buy you everything, yet it can make you experience luxurious life. Same goes with any firm as enough cash, helps the firm to absorb any unforeseen emergency. Cash Inflow and Outflow is vital factor to determine the stability of any firm and its ability to sustain. It is important to meet short-term liabilities. To understand the financial health of any company, financial analysis involves dissecting the Cash flow Statement or fund flow Statements. Let’s increase our financial quotient “FQ” and understand the purpose of cash flow analysis or Fund Flow Statement Analysis in detail.

To understand the elements of cash flow statement, lets consider a scenario–

My friend is 28 years old, working in an MNC. For him, the salary credited to his account every month is Cash flow from operating activity- as it’s coming from his main occupation. Now he has invested some of his family’s savings in buying an apartment & rented it. The monthly rent that he gets becomes his cash flow from investing activities. Lastly, he also bought some shares of Blue-chip companies, so dividends that he gets out of them can be termed as cash flow from financing activities.

Now understand as to why we need Cash Flow or Fund Flow Statements? Click below link

Purpose of Cash flow Analysis (Fund Flow Statement) — FinMargin

This post originally appeared on Finmargin website at https://www.finmargin.com/