Original Research

Cash flow statement: Management tool or statutory requirement?

I. J. Lambrechts
South African Journal of Business Management | Vol 25, No 1 | a840 | DOI: https://doi.org/10.4102/sajbm.v25i1.840 | © 2018 I. J. Lambrechts | This work is licensed under CC Attribution 4.0
Submitted: 16 October 2018 | Published: 31 March 1994

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I. J. Lambrechts, Department Business Management, University of Stellenbosch, South Africa

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The Cash Flow Statement (CFS) had been in use in South Africa since October 1988. It replaced the Statement of Sources and Application of Funds, which had been in use since 1973. In spite of the general acceptance of the benefits of the CFS and its superiority over the Statement of Sources and Application of Funds, there are certain inherent problems. These problems mainly relate to the format of the CFS and its ability to assist in forecasting the survival prospects of an enterprise. In this article the focus is firstly on the format of the CFS and it is compared with the requirement of other guidelines. A revised format is proposed. It also considers the usefulness of the CFS as a management tool in financial decision making. Areas of financial decision making which are considered, are financing, capital investment, dividend and pricing decisions. The final conclusion is that although the CFS could be standardized to a large extent, the same does not apply to the calculation of cash flows for financial decision making in different areas.


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