The statement of cash flows, commonly known as the cash flow statement, displays the cash inflows and outflows during a specified accounting period.
Pro forma cash flow statement refers to the cash flow statement prepared by the business entity to prepare the projections of the amount of cash inflow and amount of cash outflow which they expect to have in future from the different activities which include operating activities, investing activities and financing activities. Reconciliation of Cash A major strength of a cash flow statement is its ability to reconcile a company's sources and uses of cash.

Thus, all the profits are deducted and all the losses are added back to get the actual cash inflow or outflow. Utility of Cash Flow Analysis 3. 3. Limitations. However, it suffers from some limitations, which are as follows: (1) A Cash Flow Statement only reveals the inflow and outflow of cash. Disadvantages of Cash Flow Statement Since it shows only cash position, it is not possible to arrive at actual profit and loss of the company by just looking at this statement alone. This statement is normally used by the management team, owner, shareholders, and many other stakeholders.

Construction of Cash Flow Statement: There are numerous variations in the form and terminology employed in statements of cash flow. The cash flow statement shows a business’s cash inflow and cash outflow over an accounting period, normally a month or a year. A sources and uses of funds statement, now replaced by the cash flow statement, shows the flows in and out of the business that causes a net change in funds. (a) Fails to Present Net Income: Cash Flow Statement actually fails to present the net income of a firm for a period since it does not consider non-cash items which can easily be ascertained by an Income Statement. Utility of Cash Flow Analysis 3.

Cash flow statement does not disclose net income from operations. 2. The cash flow statement also referred to as the statement of cash flows allows business owners and managers to examine current cash balances and to make forecasts of the future cash flows of the business. opening cash and closing cash for a particular period. Limitations. QUESTION: What are the limitations of a cash flow statement? Simply using the income statement won't allow you to understand the other relationships that exist between a company's income components and other aspects of the business. Disadvantages of Cash Flow Statement. 1. Business owners, managers, banks, and investors to make calculated financial decisions use the information that is provided in the cash flow statement.

Most shareholders, especially in C-corps, are not involved with the daily operations of a company. A major strength of a cash flow statement is its ability to reconcile a company's sources and uses of cash. The cash flow statement …
The following are the limitation (Disadvantages) of the income statement: From the financial statements, users want to comprehend key facts about the business's performance and disposition and thereafter make decisions about the business based on facts from the statements. The International Accounting Standards 7 ( IAS 7) and Generally Acceptable Accounting Principles ( GAAP ) proposed a variety of expectations to ensure cash flows aren’t misinterpreted by investors. Cash flow statement shows only cash inflow and cash outflow.