Solution:

Statement of cash flows facilitate different users of Financial Statements such as Investors, Creditors, Lendors and Management etc. to assess the ability of the business concern to meet its obligations well in time, ability of the business to pay dividends, the need for finance from outside sources, etc.

Importance of Statement Cash Flows

1) It helps in assessing the cash flows of a business concern in its operating activities, investing activities, and financial activities separately in the accounting period.

2) It provides the reason for the difference and helps in reconciling the differences between the actual cash of the enterprize and related net income.

3) Through this investors can easily understand the capacity of the business concern in respect of declaring and paying dividends.

4) It helps the management to understand the adequacy of funds to meet its day to day operational requirement.