ABSTRACT
This chapter provides importance of cash, some misconceptions, cash flow statement, cash flow analysis and interpretation using the cash flow statement. It discusses the Cash Flow Statement based on the International Accounting Standard (IAS) 7. The IAS 7 also requires the statement to be accompanied by a number of reconciliations and a series of notes. The cash flow statement analyses the changes that have taken place between the two Statement of Financial Position (SFP) dates so far as sources and uses of cash funds are concerned. This statement shows changes in the capital structure and asset structure of a business during the period and, together with the Statement of Profit or Loss, explains the events which have led up to the most SFP. The logic behind the quality of income ratio is that high-quality earnings should reflect the cash flows of the business.
