· They can help shareholders to assess cash position (liquidity) of the business
· They show shareholders where cash has come from and where spent
· They provide some information not in the income statement or statement of financial position
The importance of liquidity:
· Cash is essential to short-term survival of the business. If it cannot pay its running costs, the company can be placed into administration.
· It could affect the level of dividends
· It may indicate whether the company can afford future expansion
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