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I work in a consultancy and for a firm providing services, the increase or decrease in cash is considered as vital because it can define the overall management of the firm in terms overall financial management…
The increase or decrease in the cash is important in the sense that it clearly established where the money i.e. cash has been utilised. If we analyze a cash flow statement of any firm, we will notice that it is divided into three different parts i.e. operations, investing and financing. The operating activities section mentions the movement of cash flows into those areas which are mostly related with the generation of profit therefore this section of the cash flow clearly indicates the increase or decrease of cash flows into those activities which can be attributed to the earning of profit therefore the movement or increase of decrease of cash into those areas define how much cash has been spent or earned in those activities. This is more significant than profit and loss because profit and loss changes do not indicate whether and how the money has been spent into operating activities. Similarities, increase or decrease of cash into the investing activities suggest the actual cash outlay been made into investing activities made by the firm. It also further indicates that the cash put into investing activities would clearly define how and where the investment have been made and in what quantity- changes and profit and loss do not indicate such information to the shareholders. ...
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