You Decide: Is the cash flow statement necessary?
Response to the following problem:
You were at dinner with some family and friends when one of them started talking about the long hours he has been putting in at work-a local waste management company. He said that cash flows have been bad and he has been staying up late trying to figure out the problem. When asked about the condition of his statement of cash flows, he said, "We don't have one of those statements to assess cash flows, we just use EBITDA (earnings before interest, taxes, depreciation, and amortization). Besides, everything I need to know is in either the balance sheet or income statement." Is a statement of cash flows necessary, or is the information it contains redundant of the balance sheet and income statement?