RASMUSSEN Importance Of Cash Flow Statements And Balance Sheet

The Statement of Cash Flow is often used in combination with other reports, although a business’ cash flow is important; other financial statements (Statement of operations, Statement of Change in Net Assets etc.) are also important because they provide information about the performance and changes in financial standings of a business. The information provided is beneficial to a wide range of users in making financial decision. All together these statements and reports will determine if a business will or will not be successful.

Sharlene Salinas

In any business organization, financial management is a fundamental function that determines the organization performance. It helps the management track its performance records evaluating its current financial position and prepare for future financial management. There are several finance management tools used and this include; balance sheet, the statement of operation and the statement of cash flow. For Healthcare organization, financial management techniques provide a substantive framework for development and performance measurement. They enable the healthcare management establishes measures for the provision of quality healthcare services and formulates strategies healthcare improvement due to balance in financial position.

The balance sheet is a financial statement that provides the organization’s liabilities, assets and shareholders’ equity basing on specific financial periods. A balance sheet is a significant finance management statement essential in healthcare organization since it provides dynamic financial information about financial spending. Due to the availability of technological systems, computing systems have provided financial assessment measures for the organization’s capital structure. The aspects that define a company’s balance sheet include liabilities, assets and shareholder equity. The three aspects are essential for the development of an organization since they define the essential capital structure of an organization showing the financial utility and functions.

The three principles of balance sheet consist of various accounts that breakdown the financial specifics of the organization. The balance sheet is like a snapshot that represents the financial state of the company at a particular moment. The different ratios obtained from the balance sheets help investors get information on the financial health of an organization. Some of the essential ratios include acid-test ratio and debt-to-equity ratio. The current assets include cash and equivalents, inventory and accounts receivable. Another aspect of assets includes non-current assets include intangible assets, plant, equipment, and property. In a health organization, there are current liabilities and as well as non-current liabilities that define the financial operating structure.

Other financial statements include statements of operation and the cash flow statement. Information from the two statements is of vital importance in the financial management of the organization. The statement of cash flow, for instance, shows the flow of the organization’s cash: inflow or outflow providing accountability for the organization’s finances within a specific time. The statement of operation, on the other hand, provides information on the performance of the organization about profit or loss-making dynamics within a given period of time.