1. Problems addressed
Information about the historical changes in cash and cash equivalents of an enterprise is required in the form of a cash flow statement classifying cash flows during the reporting period from the operating, investing, and financing activities. Users require this information in order to form an opinion on:
- Changes in net assets.
- Financial structure of the enterprise.
- Solvency and liquidity of the enterprise.
- Ability of the enterprise to influence the amounts and timing of cash flows.
- Ability of the enterprise to generate cash.
- Present value of future cash flows of different enterprises (through models).