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Learning Objectives: A. Objectives of Cash Flow Statement

The document discusses the objectives of cash flow statements and financial planning. Specifically, it notes that cash flow statements measure annual cash inflows and outflows from operating, investing, and financing activities; help assess liquidity, solvency, and the ability to generate future cash flows; and provide necessary information to users. Additionally, the document states that financial planning aims to ensure availability of funds when needed and avoid raising funds unnecessarily.

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Elaine Mateo
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467 views2 pages

Learning Objectives: A. Objectives of Cash Flow Statement

The document discusses the objectives of cash flow statements and financial planning. Specifically, it notes that cash flow statements measure annual cash inflows and outflows from operating, investing, and financing activities; help assess liquidity, solvency, and the ability to generate future cash flows; and provide necessary information to users. Additionally, the document states that financial planning aims to ensure availability of funds when needed and avoid raising funds unnecessarily.

Uploaded by

Elaine Mateo
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
  • Objectives of Financial Planning
  • Objectives of Cash Flow Statement

Learning Objectives

A. Objectives of Cash Flow


Statement
1. Measurement of Cash
Inflows of cash and outflows of
cash can be measured annually which
arise from operating activities,
investing activities and financial
activities.
2. Generating Inflow of Cash
Timing and certainty of generating
the inflow of cash can be known which
directly helps the management to take
financing decisions in future.
3. Classification of Activities
All the activities are classified into:
operating activities, investing activities
and financial activities which help a
firm to analyze and interpret its various
inflows and outflows of cash.
4. Prediction of Future
A Cash Flow Statement, no doubt,
forecasts the future cash flows which
helps the management to take various
financing
decisions
since
synchronization of cash is possible.
5. Assessing Liquidity and Solvency
Position
Both the inflows and outflows of
cash and cash equivalent can be
known, and, as such, liquidity and
solvency position of a firm can also be
maintained as timing and certainty of
cash generation is known, i.e. it helps
to assess the ability of a firm to
generate cash.
6. Evaluation of Future Cash Flows
Whether the cash flow from
operating activities are quite sufficient
in future to meet the various payments

7. Supply Necessary Information to the


Users
a. To assess the ability of a firm to pay its
obligations as soon as it becomes due;
b. To analyze and interpret the various
transactions for future courses of
action;
c. To see the cash generation ability of a
firm;
d. To ascertain the cash and cash
equivalent at the end of the period.
8. Helps the Management to Ascertain
Cash Planning
No doubt a cash flow statement
helps the management to prepare its
cash planning for the future and
thereby avoid any unnecessary trouble.

B. Objectives of Financial
Planning
1. To ensure availability of funds
whenever these are required
The main objective of financial
planning is that sufficient fund should
be available in the company for
different purposes such as for purchase
of long term assets, to meet day-to- day
expenses, etc. It ensures timely
availability of finance. Along with
availability financial planning also tries
to specify the sources of finance.
2. To see that firm does not raise
resources unnecessarily
Excess funding is as bad as
inadequate or shortage of funds. If
there is surplus money, financial
planning must invest it in the best
possible manner as keeping financial
resources idle is a great loss for an
organization.

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