The Role of Cash Flow Statements in Assessing Corporate Liquidity: Insights from Bulgarian Banks

Abstract The study aims to examine which information and indicators are used by banking institutions when assessing companies-borrowers’ corporate liquidity, and to what extent the cash flow statement serves as an information source. An online survey was conducted to obtain feedback from seven major banks operating in Bulgaria on their use of information from the Cash flow statements of borrowers. According to the results of the survey, information from the cash flow statement is used by Bulgarian banks mainly in connection with the assessment of risks and liquidity of borrowers. A significant part of the banks (85.7%) assume that information from all financial statements (Statement of Financial Position, Statement of Comprehensive Income, Statement of Cash Flows and Statement of Changes in Equity) is equally useful in analyzing the liquidity and creditworthiness of enterprises. Indicators related to cash flows and liabilities are determined as the most important in analyzing the liquidity and profitability of enterprises, according to Bulgarian banks. A significant part of the banks determines the information from the cash flow statement as moderately to very useful in decision-making.