NEED FOR CASH FLOW STATEMENT

Users of financial statements, require understanding how the business generated cash and how the cash was used. Unlike the income statement where profit reported is influenced by accounting policies and estimates, cash flow indicate the performance of the business enterprise without such influences, therefore provide a better perspective to evaluating the performance.

Remember that a business enterprise can be making profits, while at the same time suffering from cash crisis. This can lead to business enterprise wind up.

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