i) It explains the financial consequences of business operation. Funds flow statement provide a ready answer to so many conflicting situation such as ;
a) Why the liquid position of the business is becoming more and more unbalanced in spite of business making more and more profit ?
b) How was it possible to distribute dividends in excess of current earning or in the presence of a net loss for the period ?
c) How the business could have good liquid position in spite of business making losses or acquisition of fixed assets ?
d) Where have the profits gone ?
Defined answers to these questions will help the financial analyst in advising the employer/ client to direct the fund to the channels which will be most profitable for thee business.
ii) It answers intricate queries: – The financial analyst can find out answer to a number of intricate questions-
a) What is the overall credit worthiness of the enterprise?