Research and Describe the Cash Flow Statement (Essay Sample)

Cash Flow Statement
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Introduction
In every business, big or small, cash is the lifeline that enables continuity without hitches. Markedly, no matter how a company is generating profits, without the flow of money, it faces serious liquidity problems. Today, the world stares at a cloud of uncertainty both locally and globally. The consumers require a reliable flow of cash so does capital markets as liquidity determines how business and flow of goods and services remain. The management cannot overemphasize the significance of cash flow management in every aspect of business operations. The control of money in business operations has the direct impact of reducing operational inefficacies and reduction of cash wastage (McLaney, 2014). The primary role of managing flow of money is to optimize cash in hand for efficient and profitable investments. The other important goal of cash flow management is to reduce the cost of bank loans regarding high-interest rates. Further, organizations and business that have strict cash flow management schemes receive favorable credit scores.
Discussion of cash flow management, cash flow statements, and income statements
As governments and financial organizations pay more attention to the management of cash flows, individual business ought to have a clear goal in the management of money cycles. As the business focus on identifying methods of increasing then the flow of cash, the emphasis is given to traditional models of managing working capital. Managing working capital if vital for business survival and management must thus pay more attention to it. Markedly the efficient and sustainable management of working capital delivers quick and sometimes sustainable goals (McLaney, 2014). While the business climate sometimes undergoes uncertainties, there are broader strategies for generating sustainable and vital cash flows.
Cash flow statements are critical to the management of the flow of money into the business because it offers essential information on receipts for cash received and payments given out to firms over a financial period. The cash flow statement further provides critical information which supports the profit and loss statements as well as the information on the balance sheet. The information that the cash flow statements carry is useful in giving accountants the status of financial statements. The information contained is significant the assessment of the business potential for generating the flow of money for the smooth operation and utilizing of the funds (McLaney, 2014). The cash flow statements further provide management with inflation for evaluating the ability if the enterprise to sustain the company operations in the long term. Notably, the cash flow statements give background information on the history of account changes equivalent of the business classifying the flow of cash in the period from financial activities and investments in the operations of the firm.
The cash flow statement outlines the difference avenues the business generates its revenues, for example, daily activities, daily sales, the fixed assets, and liabilities. Further, the statement traces business activities which show the outflow of money from the company, for example, buying of capital assets, current assets and the redeeming of debentures. Notably, the statement is developed to provide an up to date account regarding changes in the status of cash received and paid out. The advantages of using cash flow statement over other financial management techniques are not limited to disclosure of the movement of money in the business. Secondly, the organization financial integrity and planning that includes the short term and long term agenda of the business and aiding of internal auditing of the company where the management formulates policies that preserve the integrity of cash management. Lastly, cash flow management is the primary indicator of success or failure of the firm regarding financial acquisition and planning (Abor, 2017).
While the cash flow statement is critical in the financial integrity of the business, there are many controversies regarding its use. The controversy comes from the fact that the cash flow statements are in principle is pegged on income statements. Secondly, the cash flow statements do not capture other aspects such as inventory and business ac...