Benefits of statement of cashflows:

The Statement:
·         Provides a tool to evaluate liquidity, solvency and financial stability of an entity.
·         Presents detailed summary of cash inflows and outflows, the data which is not directly provided by the income statement or income statement.
·         Serves as an indicator of amount, timing and extent.
·         Facilitates the comparability as the reporting is standardized
·         Emphasizes the qualitative aspect of the profit i.e what portion of profit represents cash flows.
·         Eliminates management bi as in estimating accruals, market values, and seletion from among accounting policies.
·         Measures the ability to pay cash dividend to owners, salaries to employees and payments to suppliers.
·         Recognizes profit when it is realized and not when it is accrued.
·         Evaluate the ability to of the entity to generate its cash requirements from normal trading operations.
·         Reports the data required for computation of internal rate of return.
·         Enables to decide the users of financial statement to asses whether the expansion is financed by external funds or through cash generated from operations.  


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