A cash flow statement is a financial document that provides a summary of the cash inflows and outflows of a company during a specific period. It shows the sources and uses of cash, including operating activities, investing activities, and financing activities. The cash flow statement is an important tool for assessing the financial health and liquidity of a company, as it helps to determine its ability to generate cash and meet its financial obligations.
A cash flow statement is a financial report that shows the inflow and outflow of cash within a business over a specific period of time.
A cash flow statement is important because it provides insight into a company’s ability to generate cash and meet its financial obligations.
The three sections of a cash flow statement are operating activities, investing activities, and financing activities.
The operating activities section includes cash transactions related to the core business operations of the company, such as sales and expenses.
The investing activities section includes cash transactions related to the purchase and sale of long-term assets, such as property, plant, and equipment.
The financing activities section includes cash transactions related to the company’s capital structure, such as issuing or repurchasing stock, and borrowing or repaying debt.
Investors, creditors, and management use cash flow statements to assess a company’s financial health and its ability to generate cash.
A cash flow statement should be prepared at least annually, but many companies also prepare them quarterly for internal and external reporting purposes.
In many jurisdictions, publicly traded companies are required to include a cash flow statement in their financial reports, as mandated by accounting standards and securities regulations.
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This glossary post was last updated: 4th April 2024.
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