The cash flow of a company, which is the set of operations which absorbed or generated cash, cannot be easily understood from the balance sheet and the income statement.
The cash flow statement, which must be now mandatorily included in the Financial Statements (for those companies preparing ordinary Financial Statements), allows to represent the origin of the company’s cash flows and the changes occurred in liquid assets from one fiscal year to another. Its informational value is important for both financial planning (ex-ante) and for final balance (ex-post) purposes.
Therefore, it is crucial that the cash flow statement is correctly structured and interpreted.
