The Statement of Cash Flows is a key component of financial reporting under Ind AS 7. It provides supplementary information to financial statement users by outlining the sources and uses of cash over a given accounting period. This statement shows how cash was generated by an entity and how it was subsequently used, helping stakeholders evaluate the entity’s ability to generate future cash flows, the timing of those flows, and their certainty. Understanding cash movements is critical for assessing liquidity, solvency, and financial flexibility.
Objectives and Benefits of the Statement of Cash Flows
The purpose of the Statement of Cash Flows is to provide a clear and concise view of the entity’s cash generation and usage. This information assists users in evaluating the entity’s ability to generate cash and cash equivalents. It also provides insight into the timing and certainty of future cash flows, the entity’s capital structure, and how efficiently the entity uses its resources. By examining historical cash flow data, users can better predict future cash flow patterns and assess the accuracy of past projections. Furthermore, it identifies areas where additional cash generation may be necessary to sustain operations or support growth.
Scope of Ind AS 7
Ind AS 7 mandates that all entities prepare a Statement of Cash Flows in compliance with its requirements. The statement must be included as an integral part of the financial statements for every period presented. This applies to all entities regardless of their size or industry. The cash flow statement must adhere to the presentation and classification principles laid out in the standard, ensuring consistency and comparability across reporting periods.
Definitions Under Ind AS 7
Cash includes cash on hand, balances with banks, and demand deposits that are readily available for withdrawal without restriction or penalty. Demand deposits refer to those bank deposits that can be withdrawn without prior notice or incurring a penalty. Long-term or fixed deposits generally do not meet the criteria to be classified as cash due to their withdrawal restrictions.
Cash equivalents are defined as short-term, highly liquid investments that are readily convertible into known amounts of cash and that are subject to an insignificant risk of changes in value. These investments typically have a maturity period of three months or less from the date of acquisition. Examples of cash equivalents include treasury bills and government securities that mature within three months. In some cases, preference shares can also be considered cash equivalents if acquired within three months of their redemption date and are subject to minimal risk. However, equity shares cannot be classified as cash equivalents due to their inherent price volatility. Entities are required to disclose the composition of their cash and cash equivalents. If the amounts disclosed differ from those in the financial statements, a reconciliation must be provided. Any change in the list of items classified as cash and cash equivalents is treated as a change in accounting policy under Ind AS 8.
Classification of Bank Balances and Deposits
Under Division II of Schedule III to the Companies Act, 2013, bank balances other than cash and cash equivalents must be disclosed separately. These may include balances held as margin money or security against borrowings and guarantees, or bank deposits with an original maturity of more than three months but less than twelve months. Deposits with an original and remaining maturity period exceeding twelve months are to be presented under other non-current financial assets.
Classification of Cash Flows
Cash flows are classified into three categories under Ind AS 7: operating activities, investing activities, and financing activities. This classification reflects the nature of the activities and helps users understand how cash is generated and used in different parts of the business.
Operating activities include the principal revenue-generating activities of the entity and other activities that are not classified as investing or financing. Examples of operating activities include cash receipts from sales, payments to suppliers and employees, receipt of royalties or fees, insurance payments and claims, and cash received from extraordinary items such as disaster settlements. Investing activities include the acquisition and disposal of long-term assets and investments not classified as cash equivalents. This category also includes loans and advances given to third parties and income received from investments. Financing activities include changes in the size and composition of the entity’s equity and borrowings. Examples include issuing shares, borrowing and repaying loans, paying dividends, and servicing finance leases.
Format of the Statement of Cash Flows
The standard presentation format for a Statement of Cash Flows includes the following elements:
- Cash flows from operating activities
- Cash flows from investing activities
- Cash flows from financing activities
- Net increase or decrease in cash and cash equivalents
- Add: Opening balance of cash and cash equivalents
- Closing balance of cash and cash equivalents
This presentation structure helps financial statement users understand the sources and uses of cash and how each type of activity affects the overall liquidity of the entity.
Importance of the Statement of Cash Flows for Decision Making
The cash flow statement enhances decision-making by providing insights into each category of activity. Operating activities highlight an entity’s ability to generate future cash flows from its core operations. Investing activities indicate future revenue generation capabilities by reflecting how current investments are made. Financing activities reveal how an entity funds its operations and future growth and its obligations to providers of capital, such as shareholders and lenders. These insights help stakeholders make informed judgments about the financial health and operational efficiency of the entity.
Presentation of Cash Flows from Operating Activities
Ind AS 7 permits entities to choose between two methods for presenting operating cash flows: the direct method and the indirect method. The standard encourages the use of the direct method due to its clarity and detail, although both methods are acceptable.
Direct Method of Presenting Operating Cash Flows
Under the direct method, major classes of gross cash receipts and payments are reported. The information can be sourced directly from accounting records or derived by adjusting the profit and loss statement. An illustrative format under the direct method may include:
- Cash receipts from customers
- Cash paid to suppliers and employees
- Cash generated from operations
- Income tax paid
- Proceeds from extraordinary items
- Net cash from operating activities
This method presents a straightforward picture of cash flow movements from operating activities, helping users better understand cash inflows and outflows.
Indirect Method of Presenting Operating Cash Flows
The indirect method begins with net profit before tax and extraordinary items. It adjusts for non-cash and non-operating items as well as changes in working capital components. The key adjustments include:
- Depreciation
- Goodwill written off
- Interest and dividend income or expense
- Changes in inventories, receivables, and payables
- Tax payments
- Proceeds from extraordinary items
An illustrative format under the indirect method would include:
- Net profit before taxation and extraordinary items
- Adjustments for depreciation and other non-cash items
- Changes in working capital
- Cash generated from operations
- Income tax paid
- Net cash from operating activities
This method is widely used due to its alignment with accrual-based profit figures and its ability to reconcile the net income to net cash generated from operations.
Classification of Interest and Dividends in the Cash Flow Statement
Under Ind AS 7, cash flows arising from interest and dividends are classified based on the nature of the entity and the activity. An entity must present these flows in a manner that is most appropriate to its business. The classification differs between financial institutions, on,s such as banks,, and other types of entities.
For banks and financial institutions, interest received on loans and advances is classified under operating activities, while for other entities,, it falls under investing activities. Interest paid on borrowings is classified as an operating activity for banks but as a financing activity for other entities. Dividends received are considered investing activities regardless of the nature of the entity. Dividends paid, whether on preference or equity shares, are treated as financing activities. Lease payments, interest paid under finance leases, and principal repayments related to such leases are all considered financing activities. Interest paid to vendors for acquiring assets on deferred payment terms is classified under financing, and the principal repayment under investing. Penal interest paid or received for delayed payments is generally classified as operating cash flow, as it is closely related to the primary revenue-producing activities of the business. Interest paid on delayed tax payments and interest received on tax refunds are also classified under operating activities.
Presentation Requirement for Interest and Dividends
Ind AS 7 requires full disclosure of the total amount of interest paid during the reporting period in the Statement of Cash Flows. This applies regardless of whether the interest is recognised as an expense in the statement of profit and loss or capitalised by Ind AS 23. Transparency regarding such cash flows helps users understand the financing costs and investment returns of the business, enhancing their ability to assess financial performance and position.
Carve Outs in Ind AS 7 Compared to IAS 7
The Indian Accounting Standard (Ind AS 7) contains certaicarve-outsts when compared to the International Accounting Standard (IAS 7). These differences impact the classification of specific cash flows.
Under IAS 7, entities other than financial institutions have the option to classify interest paid and interest and dividends received as operating cash flows. Ind AS 7, however, does not provide this option. It requires non-financial entities to classify interest paid as financing activity and interest or dividends received as investing activities. This removes flexibility and ensures uniformity in reporting across entities in India.
Similarly, while IAS 7 allows dividends paid to be classified as either operating or financing activities, Ind AS 7 mandates their classification under financing activities only. These mandatory classifications aim to enhance comparability and standardisation among Indian entities but may limit the ability of companies to reflect the economic substance of some transactions.
Income Tax Treatment in Cash Flow Statements
Income tax payments are generally classified under operating activities unless they can be specifically identified with financing or investing activities. Ind AS 7 recognises that it is often impractical to allocate tax payments among different categories. Therefore, in most cases, taxes paid are reported under operating cash flows.
If it is feasible to allocate taxes to more than one category, the allocation should be made accordingly. In such situations, the entity should disclose the total amount of taxes paid during the period along with the categorised allocation. For example, if a tax payment is directly related to the sale of an investment, it should be reported under investing activities. However, in cases where such direct linkage is not possible or practicable, the tax payment is included under operating activities. This approach enhances the relevance of information presented in the statement without compromising its reliability.
Foreign Currency Cash Flows
When entities deal with foreign currency transactions, they must convert these cash flows into their functional currency using the exchange rate prevailing at the date of the cash flow. Entities may use an exchange rate that approximates the actual rate for convenience, provided it yields materially similar results.
Unrealised foreign exchange gains or losses are excluded from the Statement of Cash Flows because they do not involve actual movements of cash. However, the effect of exchange rate fluctuations on cash and cash equivalents held or due in foreign currency is reported separately in the cash flow statement. This adjustment is included in the reconciliation of opening and closing cash and cash equivalents. It captures the impact of changes in exchange rates during the reporting period and is shown separately from the main cash flow categories. This helps users understand how currency fluctuations affect the cash position of the business.
Investments in Subsidiaries, Associates, and Joint Ventures
When an entity holds investments in subsidiaries, associates, or joint ventures, the presentation of cash flows must be restricted to transactions between the investor and investee. These transactions include dividends received, advances, and similar flows. The standard requires the reporting entity to include in its cash flow statement only those cash flows that occur between itself and the investee. This ensures that the statement reflects actual cash movements relevant to the reporting entity and avoids double counting.
Entities that use the equity method to account for their investments in associates or joint ventures must still include cash flows relating to investment purchases, distributions, and intercompany receipts or payments in their cash flow statements. When a subsidiary or business unit is acquired or disposed of, the aggregate cash flows from the transaction must be reported separately under investing activities.
In cases of acquisitions or disposals, the following disclosures are required:
Total consideration paid or received
Cash and cash equivalents included in the transaction
The amount of cash and cash equivalents held in the acquired or disposed subof of sidiary
Assets and liabilities, excluding cash, classified by major categories
These disclosures enhance transparency and provide clarity to users about the nature and impact of the transactions on the entity’s cash position. If the investment in the subsidiary is measured at fair value through profit or loss, some of these disclosures may be omitted.
Change in Ownership Without Loss of Control
Changes in ownership interests in a subsidiary that do not result in a loss of control, such as acquiring or disposing of additional equity instruments, are considered equity transactions. These transactions are reported under financing activities in the Statement of Cash Flows. However, if the subsidiary is held by an investment entity and is required to be measured at fair value through profit or loss, the classification may vary depending on the nature of the transaction.
This classification is aligned with the guidance in Ind AS 110, which governs consolidated financial statements. The requirement ensures consistency between the accounting treatment of equity changes and their cash flow presentation. By distinguishing between controlling and non-controlling changes, users are better able to evaluate the impact on ownership structure and financing strategy.
Non-Cash Transactions
Investing and financing transactions that do not involve the use of cash or cash equivalents are excluded from the Statement of Cash Flows. However, such transactions must be disclosed elsewhere in the financial statements to ensure that users are aware of significant non-cash developments.
Examples of non-cash transactions include:
- Acquiring assets by assuming related liabilities
- Acquiring an entity through equity issuance
- Conversion of debt into equity
These transactions are economically significant and affect the entity’s financial position, even though they do not involve immediate cash movement. By disclosing them, the entity ensures that users receive a complete picture of the financing and investing decisions undertaken during the reporting period.
Components of Cash and Cash Equivalents
Entities are required to disclose the components that make up cash and cash equivalents, along with a reconciliation between amounts presented in the Statement of Cash Flows and those reported in the balance sheet. The accounting policy used to determine the composition of cash and cash equivalents must also be disclosed. Any change in this policy must be reported by Ind AS 8, which deals with accounting policies, changes in accounting estimates, and errors.
Significance of Segmental Cash Flow Disclosure
Segmental cash flow disclosure provides additional clarity about the various components of a business. When entities operate in multiple segments, such as different industries or geographical locations, users of financial statements benefit from understanding how cash flows are generated and used within each segment. This segmentation allows for better analysis of risk exposure, investment needs, and performance assessment of each business unit.
Segmental cash flow information helps assess how cash flows from one part of the business relate to or support another. It also gives insight into how cash generated from profitable units is reinvested or used to support less profitable or emerging operations. Entities may voluntarily provide this disclosure or be required to do so under other accounting or regulatory standards, but even when not mandatory, it significantly improves financial transparency and decision-making capabilities for users.
Availability of Cash and Cash Equivalents
Some cash and cash equivalents held by the entity may not be available for immediate use due to legal or contractual restrictions. Ind AS 7 requires disclosure of the amount of significant cash and cash equivalent balances that are not available for use and mandates management commentary on the nature of such restrictions.
An example would be cash held in a foreign branch of the company, where exchange controls or local laws prevent the immediate repatriation of funds. Another example includes cash held as collateral or margin money, which cannot be freely accessed until certain conditions are met. These disclosures are essential for users to assess the true liquidity position of the entity and understand whether the reported cash and cash equivalents are accessible to meet current obligations or support operational needs.
Importance of Classifying Cash Flows by Activity
Classifying cash flows into operating, investing, and financing activities helps users gain insights into an entity’s financial strategy and operational efficiency. Operating activities show how well the entity is generating cash from its core business. Investing activities reflect the allocation of funds into long-term assets or investments. Financing activities demonstrate how the entity raises and repays capital.
By understanding cash flows in each category, stakeholders can identify areas of strength and weakness. For example, consistent positive operating cash flows indicate a sustainable business model, while negative investing cash flows may signal growth through asset acquisition. Financing cash flows highlight whether the company relies heavily on external funding or returns capital to shareholders through dividends and buybacks. This classification is not only helpful in evaluating past performance but also in forecasting future liquidity and capital requirements.
Cash Flow Implications of Hedge Accounting
When an entity uses derivative contracts or financial instruments to hedge identifiable risks, the treatment of the resulting cash flows in the statement must align with the cash flows of the hedged item. If a hedge relationship qualifies for hedge accounting under Ind AS 109, the cash flows from the hedging instrument must be classified in the same manner as the underlying hedged transaction.
For example, if an entity hedges the risk of a forecast sale, which is part of operating activity, then the cash flow effects of the hedge must also be classified under operating activities. Similarly, a hedge of a financing activity such as interest rate exposure on debt would have its related cash flows presented under financing activities. This consistent classification ensures that financial statement users can identify how hedging strategies impact the entity’s liquidity and risk management practices. It also avoids distortion in the categorisation of cash flows that might otherwise mislead users about the nature of underlying transactions.
Influence of Ind AS 116 on Cash Flows
Ind AS 116 requires lessees to recognise lease liabilities and corresponding right-of-use assets on the balance sheet for most leases. In the cash flow statement, cash payments made to reduce lease liabilities must be classified as financing activities. This includes the principal portion of the lease payment.
Interest payments on lease liabilities are classified based on the policy adopted by the entity. Typically, these are treated as financing cash outflows unless the entity qualifies as a financial institution. Variable lease payments not included in the measurement of lease liabilities, and payments related to low-value or short-term leases, are classified under operating activities. The adoption of Ind AS 116 has significantly affected the classification and magnitude of cash flows for lessees, especially those with a large portfolio of long-term leases. It provides a clearer picture of lease financing and separates lease-related financing flows from the operating costs of using the underlying assets.
Determining the Operating Cash Flow Presentation Approach
Entities are encouraged to use the direct method of presenting operating cash flows as it offers better visibility into actual cash inflows and outflows. However, the indirect method remains more common due to its ease of preparation and alignment with accrual-based financial reporting.
Under the direct method, operating cash flows are presented by disclosing major categories of gross cash receipts and payments. This method directly links cash flow data to cash transactions and helps users understand how operational activities influence liquidity. The indirect method, by contrast, starts with net profit before tax and makes adjustments for non-cash items, changes in working capital, and non-operating gains or losses. Although it provides a reconciliation between net profit and net operating cash flows, it may obscure the detdetailss individual cash transactions.
Choosing between the two methods depends on the nature of the entity, the systems in place for capturing cash data, and the information needs of users. In practice, many entities choose the indirect method for convenience, despite the standard’s preference for the direct method.
Practical Issues in Classifying Cash Flows
Although Ind AS 7 provides broad guidance on the classification of cash flows, practical issues often arise in determining the correct treatment of complex transactions. Entities must exercise professional judgment in cases where the nature of the cash flow is mixed or ambiguous.
For instance, a company might receive compensation from an insurance claim related to an asset loss. Whether this cash inflow is treated as operating or investing may depend on the nature of the asset and the circumstances surrounding the loss. Similarly, cash advances received from customers may be classified as operating activities, but if they relate to future capital projects, an argument could be made for their classification under financing.
Another challenge is the classification of cash flows involving subsidiaries or associates. Cash flows from dividends or advances are relatively straightforward, but other intercompany cash transfers, particularly under consolidated reporting, may raise issues regarding their presentation. A clear policy and consistent application are vital to ensuring the reliability and comparability of reported cash flows.
Role of Accounting Policies in Cash Flow Reporting
The accounting policy adopted by an entity plays a crucial role in the presentation of cash flows. This includes decisions regarding the classification of specific cash flows, the use of the direct or indirect method, the treatment of taxes, interest, and dividends, and the determination of what constitutes cash equivalents.
Entities must disclose the accounting policies that govern their cash flow presentation and composition. Any changes in these policies must be disclosed and accounted for under Ind AS 8, which requires restatement of comparative periods or explanation for prospective application. Proper policy disclosure enhances transparency and helps users understand how cash flow information aligns with the financial statements.
Entities must also ensure consistency in applying these policies from period to period. Inconsistent application can reduce the reliability of the statement and undermine the usefulness of the information presented. Policies related to foreign exchange treatment, classification of restricted funds, and treatment of lease payments must be explicitly documented and applied uniformly.
Disclosures Under Ind AS 7
In addition to the cash flow statement itself, Ind AS 7 mandates certain disclosures to provide users with a more comprehensive understanding of an entity’s cash flow situation. These disclosures enhance transparency and enable better comparability across different companies and industries.
One of the key disclosure requirements is the reconciliation of cash and cash equivalents. Entities must disclose the components of cash and cash equivalents and present a reconciliation between the amounts in the cash flow statement and those reported in the balance sheet. This includes explaining any restrictions on the use of cash balances.
Another important disclosure is the explanation of non-cash investing and financing activities. Since these transactions do not involve cash flows, they are not included in the cash flow statement but must be disclosed separately. Examples include the acquisition of assets through leases or the conversion of debt to equity.
Entities are also encouraged to disclose additional information that may be relevant to users, such as undrawn borrowing facilities, aggregate cash flows from acquisitions and disposals of subsidiaries, and the impact of foreign exchange rate changes on cash and cash equivalents.
Ind AS 7 also requires disclosure of changes in liabilities arising from financing activities. This includes both cash flows and non-cash changes, such as the effect of changes in foreign exchange rates or fair values. This requirement helps users understand how financing activities have affected the entity’s financial position.
Disclosures under Ind AS 7 aim to provide users with a full picture of an entity’s cash position, its ability to generate cash, and how it manages its cash flows. These disclosures are an essential part of financial reporting and are crucial for stakeholders making economic decisions.
Significance of Cash Flow Statement in Financial Analysis
The cash flow statement plays a vital role in financial analysis, providing insights that are not readily available from the balance sheet or income statement. It helps users assess the liquidity, solvency, and financial flexibility of an entity, which are critical for evaluating its financial health.
Liquidity refers to the ability of an entity to meet its short-term obligations using its available cash and cash equivalents. By analyzing the cash flows from operating activities, stakeholders can determine whether the company generates sufficient cash to sustain its operations without relying on external financing.
Solvency pertains to the entity’s capacity to meet its long-term obligations. Cash flows from financing and investing activities provide valuable information about how a company funds its operations and whether it can service its debt over the long term.
Financial flexibility indicates how well a company can adapt to changing circumstances, such as economic downturns or unexpected opportunities. A healthy cash flow position enables a company to respond quickly and effectively, enhancing its competitive advantage.
The cash flow statement also helps identify trends and patterns in cash generation and usage. For instance, consistent negative cash flows from operating activities may signal underlying business problems, even if the income statement shows a profit. Similarly, large investing outflows may indicate aggressive growth strategies, while high financing inflows may suggest dependency on external funding.
Investors, creditors, and analysts often use cash flow ratios, such as the operating cash flow ratio, free cash flow, and cash flow coverage ratios, to evaluate a company’s performance and financial stability. These ratios provide a more accurate picture of an entity’s financial condition than earnings alone.
In summary, the cash flow statement is an indispensable tool in financial analysis. It provides a clearer understanding of a company’s cash movements and complements other financial statements, leading to more informed decision-making.
Challenges in Preparing Cash Flow Statements
Despite its importance, preparing a cash flow statement by Ind AS 7 can be challenging. Several practical difficulties may arise, particularly in complex business environments or when dealing with consolidated financial statements.
One of the main challenges is the classification of cash flows. Determining whether a particular transaction should be classified under operating, investing, or financing activities requires professional judgment and a deep understanding of the entity’s business model and operations.
For example, interest and dividends received or paid can be classified differently depending on whether the entity is a financial institution. This subjectivity can lead to inconsistencies across entities and periods, affecting comparability.
Another challenge is the availability and reliability of data. Preparing an accurate cash flow statement requires timely and precise information about cash transactions. This can be difficult in organizations with inadequate accounting systems or poor internal controls. Reconciling discrepancies and ensuring the integrity of data can be time-consuming and resource-intensive.
Non-cash transactions pose another difficulty. While these transactions must be excluded from the main body of the cash flow statement, they still require disclosure. Identifying and accounting for such transactions, especially in complex financing arrangements or asset acquisitions, adds to the preparer’s workload.
In consolidated financial statements, the complexity increases further. Intercompany transactions must be eliminated, and cash flows must be consolidated across subsidiaries operating in different jurisdictions, currencies, and regulatory environments. This requires careful planning, coordination, and expertise.
Moreover, changes in accounting standards, interpretations, and regulatory requirements can necessitate updates to the methodology and presentation of cash flow statements. Keeping up with these changes and implementing them correctly can be a significant burden for finance teams.
Despite these challenges, organizations must strive for accuracy and transparency in their cash flow reporting. Investing in robust accounting systems, continuous training, and internal controls can help mitigate these difficulties and enhance the quality of financial reporting.
Impact of Technology on Cash Flow Reporting
The advent of technology has significantly transformed the preparation and analysis of cash flow statements. Automation, data analytics, and cloud-based accounting software have made it easier for businesses to manage their cash flow processes more efficiently and accurately.
Automated accounting systems can track and record cash transactions in real time, reducing the risk of errors and omissions. These systems can generate cash flow statements directly from the general ledger, saving time and effort. They also facilitate compliance with Ind AS 7 by ensuring that transactions are classified and disclosed appropriately.
Data analytics tools enable businesses to analyze their cash flows in greater depth. These tools can identify trends, detect anomalies, and provide predictive insights, helping management make informed decisions about cash management, investment strategies, and financing needs.
Cloud-based platforms offer additional advantages, such as accessibility, scalability, and integration with other business systems. They allow finance teams to collaborate more effectively, access real-time data from anywhere, and streamline the cash flow reporting process.
Artificial intelligence and machine learning are also beginning to play a role in cash flow forecasting and analysis. These technologies can process large volumes of data, identify patterns, and make predictions with greater accuracy than traditional methods. This can help businesses anticipate cash shortages or surpluses and take proactive measures.
Furthermore, technology has enhanced the transparency and timeliness of cash flow information. Stakeholders can access up-to-date cash flow data, monitor performance, and evaluate risks more effectively. This is particularly important for investors and lenders who rely on accurate cash flow information to assess creditworthiness and investment potential.
However, the use of technology also introduces new challenges, such as data security, system integration, and the need for skilled personnel. Organizations must ensure that their technological infrastructure is robust, secure, and aligned with their reporting requirements.
Overall, technology has the potential to significantly improve the quality and efficiency of cash flow reporting under Ind AS 7. By leveraging modern tools and systems, businesses can enhance their financial reporting, decision-making, and stakeholder communication.
Conclusion
Ind AS 7 plays a critical role in enhancing the transparency and comparability of financial information by standardizing the presentation of cash flow statements across entities. By categorizing cash flows into operating, investing, and financing activities, the standard enables stakeholders to assess an entity’s ability to generate cash, meet its obligations, and fund its operations and investments. The requirement to reconcile net profit with net cash from operating activities provides additional insight into the quality of earnings and the effectiveness of working capital management.
For preparers of financial statements, compliance with Ind AS 7 requires a solid understanding of classification principles, consistent application of accounting policies, and careful attention to disclosures. For analysts and investors, the statement of cash flows prepared under Ind AS 7 is a valuable tool for evaluating liquidity, solvency, and financial flexibility.