Profit Maximization: Maximization of profits is very often considered as the mainobjective of a business enterprise.

The shareholders, the owners of the business, invest their funds in the business with the hope of getting higher dividend on their investment. Moreover, the profitability of the business is an indicator of the sound health of the organisation, because, it safeguards the economic interests of various social groups which are directly or indirectly connected with the company e.g. shareholders, creditors and employees. All these parties must get reasonable return for their contributions and it is possible only when company earns higher profits or sufficient profits to discharge the obligations to them.

Cash Flow Statement A cash flow statement is a statement showing changes in cash position of the firm from one period to another. It explains the inflows (receipts) and outflows (disbursements) of cash over a period of time. Inflows of cash may occur from sale of goods, sale of assets, receipts from debtors, interest, dividend, rent, issue of new shares and debentures, raising of loans, short-term borrowing, etc. Cash outflows may be on account of purchase of goods, purchase of assets, payment of loans loss on operations, payment of tax and dividend, etc. Cash Flow Statement

A cash flow statement is a statement showing changes in cash position of the firm from one period to another. It explains the inflows (receipts) and outflows (disbursements) of cash over a period of time. Inflows of cash may occur from sale of goods, sale of assets, receipts from debtors, interest, dividend, rent, issue of new shares and debentures, raising of loans, short-term borrowing, etc. Cash outflows may be on account of purchase of goods, purchase of assets, payment of loans loss on operations, payment of tax and dividend, etc. A cash flow statement is different from a cash budget. A cash flow statement shows the cash inflows and outflows which have already taken place during a past time period. On the other hand a cash budget shows cash inflows and outflows which are expected to

take place during a future time period. In other words, a cash budget is a projected cash flow statement. Cash flow statement Vs. Fund Flow Statement

The main points of difference between funds flow statement and cash flow statement are as follows. (i) A cash flow statement shows only the changes in cash position, whereas a funds flow statement shows changes in working capital position between two balance sheet dates. Cash is only one of the elements of working capital. Therefore, a funds flow statement has a wider coverage than a cash flow statement. (ii) A cash flow statement is merely a record of cash receipts and payments. It is no doubt useful but it does not show many important changes involving the disposition of resources. In studying the short-term solvency of a firm one is interested not only in cash balance but also in the assets which are easily convertible into cash. Funds flow statement provides information about such assets. (iii) Cash flow statement is more useful to the management as a tool of financial analysis in short term. Funds flow statement is more useful in long-term. (iv)Cash is a part of working capital. Therefore, an improvement in cash position results in an improvement in the funds position. An inflow of funds may not result inflow of cash. In other words, a sound cash position generally means a sound funds position but a sounds funds position does not necessarily mean a sound cash position. (v) The technique of preparing a funds flow statement is different from the technique of preparing a cash flow statement. An increase in the current liability or a decrease in a

current asset results in an outflow of funds. But an increase in current liability or decrease in current assets (other than cash) does not result in cash inflow.