The Importance of Cashflow Statement
What Is A Cash Flow Statement and Why Is It Important?
A Cash Flow statement reflects an entity's financial health. Therefore, it is extremely valuable to investors/shareholders because it highlights any changes in a company's cash flow over a specific period of time. This, in turn, allows investors to understand how much money a company is making, how much it is spending, and where the money is coming from.
A Balance Sheet provides an investor with a snapshot of what a company owns, including the company's assets, liabilities and shareholders equity.
An Income Statement, also known as Profit and Loss Statement focuses primarily on a company's revenues and expenses.
A Cash Flow Statement differs from the Balance Sheet and Income Statement because it provides details about the cash and cash equivalent of a company.
All three financial statements are key financial reports that provide information about a company's financial performance over a specific accounting period.
However, most investors like to get cash out of their investments. With that being said, the Cash Flow Statement is the ultimate measure of how a business is performing. It is a vital indicator for investors to see if a company is making or losing money.
What Does It Mean When A Company's Book Value Per Share Is Less Than The Market Value Per Share In Common Stock?
When a company's book value per share is less than the market value per share that indicates to investors that the stock price is overvalued. When a company's book value per share increases, the stock is then perceived as more valuable, and the stock price should then increase.
Valuing a company can be quite complicated and there are different methods in doing so. Usually, an investor evaluates the stock by comparing book value per share to market value per share to help decide whether to buy shares or not.
