|
|
Article: Financial analysis: Francis Braganza explains how to prepare a cash flow statement, using November 2005's question as an example, with dates advanced two years.(study notes: PAPER P8)
- Article from:
- Financial Management (UK)
- Article date:
- October 1, 2007
- Author:
CopyrightCOPYRIGHT 2007 Chartered Institute of Management Accountants (CIMA). This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
|
It is said that the aim of cash flow reporting is to explore ways in which the underlying liquidity of a reporting entity can be revealed in accounting terms. Profit is regarded as an indicator of financial success, but, as anyone running a business will tell you, cash is king. The measurement of profit is usually based on a mixture of factual transactions and unavoidable subjective accounting judgments.
"The stock market prefers the fantasy of smooth growth to the reality of fluctuating operational performance. It falls to the creative accountant to ensure that those fluctuations are removed by hoarding profits in years of plenty for release in years of famine ...