Introduction

This chapter argues the case for cash-flow accounting, it constitutes the analytical framework for linking past, present, and prospective financial performance. Cashflow accounting may therefore also be regarded as an aid to investor decision-making. Thus, because the logic of the method, which derives from financial and economic theory, dictates that all financial transactions be specified as cash-flows to facilitate an allowance for the time-value of money as one of the costs of resource utilization, there is quite clearly no valid reason for the inference that cash-flow accounting is synonymous with receipts and payments accounting in the traditional sense of that expression. The actual return provided for a shareholder is delivered in actual money terms. If the rise in the general level of prices is accompanied by changes in the relative prices of labour and capital goods, the technological possibilities of substitution will always offer advantageous financial opportunities.