Statement of Cash Flows Template is an example prepared under IFRS and meant to be added to an annual report. As its one of the four basic statements required by most GAAPs, you really cannot underestimate the need to know why it’s required. Note however, that there are different types of cash flows as there are usages. The one on the annual report is meant for reflecting a previous period results, however there are cash flows also projected for future purposes as well.
With this post I would like to show why one may use a cash flow statement or cash flow projection. Perhaps this explains why it’s considered to be as important to earn its place amongst balance sheet and income statement on the annual report.
Cash flow statement, if done using adequate data and estimations, can help you in determining following things:
– Liquidity (remember, that profits aren’t the only things making a company running smoothly – cash in hand is what makes the wheels go around);
– Rate of return or value (to know whether a project is worth the time and resources you need to project the inflows and outflows to know the net return if any from a project);
– Whether an entity is really in good shape. Profits don’t mean a thing if the operational cash flows is virtually non-existent.
– The risks within a financial product (how much investment and re-investment is needed, interest rates earned etc);
So I guess you already understand the value it adds both to financial statements and any other reporting. Since cash is something that is needed to buy things and those things really make the business operable, being without financial resources is the number one obstacle in any business.
Our Statement of Cash Flows Template should help you in preparing your own statement of cash flows and really keep things under control.