The main objective of every organization is to maximize profits and wealth of shareholders but cash flows are the most important element which needs to be focused for long term stability and smooth operations of business. A company needs to ensure that it earns maximum profits for shareholders but cash flows during a period of time are much more important.
The financial information regarding the profitability, financial position and cash flows are included in the financial statements published by the company. The financial statements included in an annual report of a company are the income statement, balance sheet, statement of cash flows and statements of changes in shareholders’ equity. Investors make decisions based on the profitability and cash flow positions included in these financial statements.
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