Concept of Cash flow

 There are many types of documents, company makes. These documents are formal and informal. Profit and loss Account, Balance Sheet, Trading Account are the formal documents whereas Fund Flow Statement, Cash Flow Statement are informal documents that is made to proper, maximum and optimum utilization of finance to maintain growth rate and predefined goal of organization. 

Definition:

Cash flow statement also called statement of cash flow in an accounting statement that shows the amount of money generated and used by a business during a given period of time. 

In other words we can say that a cash flow statement reveals a company's cash inflow and outflow. 

In other words we can say that the documents that shows the inflow and outflow of cash and it's concern things in a fixed financial year. This document is called cash flow statement. 

Objective:

There are many objective of cash flow. These objective are as below-

1. It shows the flow of cash from all activities of organization. These activities may be production, demand forecasting, selling, trading and so on. 

2. It shows the cash position of organization at daily, weekly, monthly, quarterly basis. 

3. It compares the allocation of cash and utilization the cash at daily, weekly, monthly, quarterly basis. 

4. It shows the liquidity position of cash of organization. 

5. It also shows the paying mode way of organization. 

6. It also shows the changing ratio of cash in short period. 

7. It also shows the cause of changing cash in a fixed period. 

Advantage/ application:

There are many advantage of cash flow. This advantage are as below-

1. It shows the changing ratio of cash. So, organization makes proper policy, planning to enjoy it for the growth of organization. 

2. It helps to forecast and arranges of cash by a proper, legal and formal way. 

3. It also checks all financial activity according to finance basis and make them more economical. 

4. It also helps to borrow money from different types of organization. 

5. It also helps in financial planning, coordination and controlling. 

6. It also makes internal financial management by an effective way. 

7. It also helps in taking short term financial decisions. 

8. It also helps to make cash budget. 

9. It also helps to achieve financial goal of organization. 

10. It also helps optimum utilisation of finance.