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1.Cash flows are a useful addition to the financial statements of companies because it is recognised that accounting profit is not the only indicator of a company's performance. Statement of cash flows concentrate on the sources and uses of cash and a useful indicator of a company's liquidity and solvency
2.The use of cash flow is very much in conjunction with the rest of the financial statements. Users can gain further appreciation of the change in net assets, of the entity's financial position and the entity's ability to adapt to changing circumstances by affecting the amount and timing of cash flows
3 Cash flow enhance comparability as they are not affected by differing accounting policies used for the some type of transactions of events.
4 Cash flow information can be used as an indicator of the amount ,timing and certainty of future cash flows.
4The relationship between profit and cash flows can be analysed as can changes in prices over time
5 Cash flow provides a better means of comparing the results of different companies.
A company could have so many assets, much more than liabilities, but if all of these assets are illiquid and the company fails to pay its obligations then it could be forced into bankruptcy/administration. Cash flow is the lifeblood of the organization.
