Liquidity and Profitability Positions of an organization: The cash Flow Statement assists in determining the company's liquidity and profitability position by monitoring the profit and loss statements
Fremont, CA: Businesses that rely heavily on seasonal sales revenue are an excellent example of why a budget is essential. If the months of June, July, August, and December typically generate 75 percent of one's company's revenue, having a budget will allow one to plan ahead. Having a plan in place for effectively distributing one's revenue over the course of a fiscal year will help one maximise profits.
The advantages of having Good Cash Flow Management
• Pay Expenses: It is the most noticeable aspect of Cash Flow Statements. This statement contains all of the company's expenditure information. An accountant or management staff can examine these records to determine the organization's total expenses and plan his business accordingly. Typically, these expenses are calculated yearly, but they are calculated quarterly or monthly for better financial management in some organizations.
• Deciding Liquidity and Profitability Positions of an organization: The cash Flow Statement assists in determining the company's liquidity and profitability position by monitoring the profit and loss statements. Liquidity refers to an organization's ability to settle a debt as soon as it becomes due. The cash flow statement depicts the company's current cash position and provides instructions or remainders regarding liquidity. The cash flow statement assists us in identifying the cash deficit before payments are due so that we can raise the necessary funds through external sources such as loans, etc.
• Tax Payments: To file income tax returns, one must have exact details about the company's income and expenses. The well-organized cash flow chart will reduce one's auditor's workload, and the report will be submitted to the government for the next step of tax payment.
