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brighton banda
Financial Consultant, Zambia
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Importance of Cash Flow Statements versus Traditional Financial Statements (Profit)
What is the importance of cash flows in comparison to financial statements (profit)?
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Ledja Dhima
Manager, Albania
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Cash Flow versus Financial Statement
A financial statement is important because it shows company's profit. Sales minus expenses, equal to gross profit or profit before tax.
However it does not show whether is company is liquid or not (Liquidity). A profitable company is not necessary liquid. Cash flow shows a company's liquidity and tells you (the bank) how the company will generate cash (which sources mostly). The current crisis proved liquidity is the key factor of a company's business continuance.
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juwele sibanda
Accountant, Zimbabwe
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Cash Flows versus Profit in Financial Statements
I agree with Ledja, rely on cash flow statement for your daily decisions:
- A profitable company can have serious challenges meeting short term liabilities.
- And a loss making company can still have a strong liquidity.
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sweety
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Javnyuy Joybert
Accountant, Cameroon
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Juan Jarquin
Financial Consultant, Nicaragua
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