CASH FLOW ANALYSIS

Abstract

One of the most important factors for a company's business is money. With it, a company provides raw materials and supplies necessary for a production process, but also uses it to settle due obligations. Also, companies sell their finished products and goods for money. Precisely for these reasons, owners of a company are interested in the sources from which money reaches a company and for what purposes that money is spent. Cash flows represent an important part of a company without whose constant flow an enterprise would not be able to function. The Cash Flow Statement is a statutory financial report that provides interested parties with information on cash inflows and outflows based on business investment and financing activities during the accounting period. Nowadays, the possibility of manipulating the accounting rules of calculation of results, income and expenses is great, which leads to a decrease in the efficiency of the income statement as an object of analysis, and increases the impact of cash flow statements. Cash flow statements are regulated by International Accounting Standard 7- Cash Flow Statement. Cash flow analysis is important in adjusting the inflow and outflow of funds on the basis of business, investment and financial activities, which is the basis for positive business operations of the company, its solvency and liquidity. The paper will explain Cash Flow analysis, compiling cash flow balance sheets, and the most important financial performance indicators of companies based on cash flow. Also, the paper will explain cash flow as an instrument for assessing liquidity, and as an instrument for assessing the profitability and financial strength of the company.