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The cash flow gives the analyst a better understanding of a company’s financial strength than traditional balance sheet ratios, which all too often have not provided creditors with early warning signals. Cash flows are less prone to distortions by accounting policies or changes in accounting methods.

There are 2 methods generally used for Cash Flow Analysis: — Direct method; — Indirect method.

The uppermost goal of the Cash Flow Analysis is: — Identification of the main sources of cash gains for a given accounting period;

The three most important financial indicators for any company’s operations are: — Sales revenue — Net Income — Cash Flows