In 1987, US Financial Accounting Standards Board (FASB) required all annual financial statements to include the statement of cash flows (SCF) as part of its components on top of the traditional income statement and balance sheet. Since then, more emphasis is put on both SCF and topic of cash flow in the hospitality industry not limiting to the importance of cash in the operations, but also to fully understand a company’s viability as an ongoing concern.
Traditionally, information for financial ratios has been gleaned from income statements and balance sheets. But, in recent years, ratios from the Statement of Cash Flows have gained attention from academicians and industry practitioners.
as cash flow ratios provide additional information in understanding the “real” operational status of a business.