The purpose of establishing the client’s cash flow and balance sheet is to identify sources of income and expenditure. Moreover, minimum liquidity is required to meet unexpected emergency cash outflow. The balance sheet will tell us whether is there sufficient liquidity. If there is a large positive cash flow but the balance sheet do not reflect the high saving rate, we will have to identify where these surplus cash has gone to. Finally, we need to identify negative equity asset as there is a danger of margin call.

All of the following planning relies on cash flow and balance sheet. Thus the cash flow statements and balance sheet represents the most fundamental items in a comprehensive financial plan.