Cash flow statements have many uses other than legal need for some companies to prepare them. Let us first of all list a few cases where a business might find them useful in helping to answer their queries:
a) One businessman wants to know why he now has an overdraft. He started off the year with money in the bank. He has made profits, and yet he now has a bank overdraft.
b) Another businessman wants to know why the bank balance has risen even though the firm is losing money.
c) The partners in a business have put in additional capital this last year. Even so, the bank balance fell dramatically during the year. They want an explanation as to how this has happened.
A study of the cash flow statement in each case would reveal to them the answers to their questions. A study of the final accounts themselves would not give them the information that they needed.
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