Which of the following are limitations of a statement of cash flows? (2024)

Which of the following are limitations of a statement of cash flows?

Limitations of Cash Flow Statement

What are the problems with the statement of cash flows?

Some common problems with the cash flows statement are the following: Classification differences between the operating statement and the cash flows statement. Noncash activities. Internal consistency issues between the general purpose financial statements.

What are two limitations of cash flow forecast?

Drawbacks. The limitations of cash flow forecasts include being unable to account for changing costs, and the accuracy of when money comes into the business. Miscalculations will affect the business which could result in debt.

Which of the following would not be on the statement of cash flows?

Cash flow from contingent activities would not be on the statement of cash flows.

What are the two limitations of funds flow statement?

Limitations of Funds Flow Statement

It doesn't consider other parameters that are part of the Balance Sheet and Profit and Loss Account. Therefore, it has to be analyzed alongside the Balance Sheet and Profit and Loss Account. The funds flow statement doesn't depict the cash position of a company.

What is cash flow statement and its advantages and limitations?

A cash flow statement reveals the speed at which the current liabilities are being paid and cash is being generated from inventory, trade receivables, and other current assets by the company. By doing so, the management of the company can easily assess its true position of cash in future.

Which of the following is incorrect with regard to the statement of cash flows?

It reconciles ending cash balance with the balance as per bank statement is incorrect about the statement of cash flows.

What are the limitations of incremental cash flow?

Limitations of calculating incremental cash flow

While calculating incremental cash flow helps you decide whether or not to take on a new project, it has limitations. Three factors might make it difficult to calculate incremental cash flow: sunk costs, cannibalization, and opportunity costs. Sunk costs.

What are the limitations of cash budget?

One of the main drawbacks of using a cash-only budgeting system is that it can be inconvenient and risky. You have to withdraw cash frequently, which may incur fees or limit your access to your money. You also have to carry cash around, which can make you vulnerable to theft or loss.

What are two limitations of financial analysis?

However, limitations of financial statement analysis include the reliance on historical data, the possibility of distorted information due to accounting policies, and the lack of consideration for qualitative factors and external influences.

Which of the following is not part of the cash flow statement operating activities?

Cash flow from operating activities does not include long-term capital expenditures or investment revenue and expense.

What is not included in the three activities of the statement of cash flows?

The correct answer is c.

They include operating, investing, and financing activities. Income activities, on the other hand, are not included in the statement of cash flows but in the income statement, also known as the statement of profit or loss.

What are major limitations of financial statements?

There are 8 limitations: Historical Costs, Inflation Adjustments, No Discussion on Non-Financial Issues, Bias, Fraudulent Practices, Specific Time Period Reports, Intangible Assets, and Comparability.

Which of the following are limitations of financial statements?

The limitations of financial statements include inaccuracies due to intentional manipulation of figures; cross-time or cross-company comparison difficulties if statements are prepared with different accounting methods; and an incomplete record of a firm's economic prospects, some argue, due to a sole focus on financial ...

What are the uses and limitations of funds flow statement?

Fund flow statements focus on actual cash transactions, leading to the exclusion of non-cash transactions. These include depreciation and changes in non-cash working capital. The limitation can impact the representation of an organization's financial position.

What is most important in cash flow statement?

The importance of the cash flow statement is that it measures the cash inflows or cash outflows during the given period of time. This knowledge informs the company's short- and long-term planning. It also helps in analyzing the optimum level of cash and working capital needed in the company.

What is included in the statement of cash flow?

A typical cash flow statement comprises three sections: cash flow from operating activities, cash flow from investing activities, and cash flow from financing activities.

What are the main features of the cash flow statement?

The cash flow statement has three key sections: cash flow from operations, cash flow from investments and cash flow from financing.

Which of the following is incorrect about the statement of cash flows quizlet?

Which of the following is incorrect about the statement of cash flows? It reconciles the ending cash account balance to the balance per the bank statement.

What is one limitation of a cash flow forecast when making business decisions?

Disadvantages of cash flow forecasts

It can't predict the future of your business with absolute certainty. Nothing can do that. Just as a weather forecast becomes less accurate the further ahead it predicts, the same is true for cash flow forecasts. A lot can change, even in 12 months.

What is the limitation of incremental concept?

Limitations. The concept cannot be generalized: The incremental concept is widely used in every business enterprise whose management has profit in mind however its success cannot be generalized because this concept is dependent on decisions made by the management.

What are examples of incremental cash flows?

The initial investment is an outflow, the scrap value is an inflow. Similarly, the revenue of $187,500 per year and the variable costs of $31,500 per year are also incremental cash flows. These cash flows will only arise if the Elfin is made and sold. The revenue is an inflow, the variable costs are an outflow.

What is cash flow limitation?

Limitations of Cash Flow Statement

Limited Net Income or Profitability Assessment: It does not directly show or measure net income or profitability, so a company can have positive cash flow but low profitability, or vice versa.

What are the major limitations of budgetary control?

What are the limitations of flexible budget?

Flexible budgets are inherently more complicated than static budgets because they require more financial oversight and frequent monitoring. Since your budget will change depending on various conditions and factors, it's crucial to monitor your revenue and expenses regularly throughout your various projects.