Question

Out of all following four options, which is the most suitable with reference to a key feature of cash flow

A. Cash flow helps in showing the increase as well as a decrease in the cash
B. Cash flow has three significant sections such as liabilities, assets and shareholders’ equity
C. Cash flow helps in showing the expenses as well as revenue of the business
D.Cash flow can be used for showing the businesses’ financial position

Answer 1

The most suitable key feature of cash flow is that it shows the increase and decrease in a business's cash, reflecting the liquidity position over time.

Step-by-step explanation:

A key feature of cash flow is that it helps in showing the increase as well as the decrease in the cash of a business. Unlike the balance sheet, which includes liabilities, assets, and shareholders' equity, the statement of cash flows provides specific information about the operating, investing, and financing activities of a company. The correct answer is that cash flow helps in showing the increase and decrease in cash, reflecting the actual liquidity position of the business over a period. Cash flows are crucial for assessing a company's ability to generate cash from operations and its effectiveness in reinvesting, paying debts, and funding operations without additional financing.

Answer 2

Cash flow statements reflect the cash increases and decreases in a company and have three main sections: operating, investing, and financing activities. They are essential financial reports separate from balance sheets that list liabilities, assets, and shareholders' equity. Therefore, the correct option is A.

Step-by-step explanation:

Out of the given options, the most suitable with reference to a key feature of cash flow is that cash flow helps in showing the increase as well as a decrease in the cash. Cash flow statements are financial reports that track the money entering and leaving a company.

They indeed reflect these cash increases and decreases over a set period and consist of three significant sections: operating activities, investing activities, and financing activities, as opposed to liabilities, assets, and shareholders’ equity which are components of a balance sheet.