Cash Flow Statements 19
Benefits of Cash Flow Information
3. A cash flow statement, when used in conjunction with the other financial
statements, provides information that enables users to evaluate the change
in net assets of an enterprise, its financial structure (including its liquidity an
solvency) and its ability to affect the amounts and timing of cash flows i
order to adapt to changing circumstances and opportunities. Cash flo
information is useful in assessing the ability of the enterprise to generat
cash and cash equivalents and enables users to develop models to assess
and compare the present value of the future cash flows of differen
enterprises. It also enhances the comparability of the reporting of operatin
erformance by different enterprises because it eliminates the effects o
using different accounting treatments for the same transactions and events.
4. Historical cash flow information is often use
amount, timing and certainty of future cash flows. It is also useful in checkin
the accuracy of past assessments of future cash flows and in examining th
relationship between profitability and net cash flow and the impact o
5. The following terms are used in this Standard with the meanings
rises cash on hand and demand de
5.2 Cash equivalents
are short term
are readily convertible into known amounts of cash and which ar
cash and cash equivalents.
5.4 Operating activities are the principal revenue-producing activities
of the enterprise and other activities that are not investing o
5.5 Investing activities are the acquisition and disposal of long-term
assets and other investments not included in cash equivalents.
activities are activities tha
and composition of the owners’ capital (including preference shar
capital in the case of a company) and borrowings of the enterprise.