This essay focuse on The cash flow from operations to current liabilities on statement of cash flows or funds flow. the flow of cash during the year to cover the debts due.
statement of cash flows or funds flow
Two limitations exist with either the current ratio or the quick ratio as a measure of liquidity:
1. Almost all debts require the payment of cash. Thus, a ratio that focuses on cash is more useful.
2. Both ratios focus on liquid assets at a point in time. Cash flow from operating activities, as reported on the statement of cash flows, can be used to indicate the flow of cash during the year to cover the debts due.
The cash flow from operations to current liabilities ratio is as follows:
n financial accounting, a cash flow statement, also known as statement of cash flows or funds flow statement, is a financial statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents