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Cash Flows
| ✪ Cash Flows (Sample) |
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The Statement of Cash Flows, also known as the Cash Flow Statement, is a financial report that tracks the movement of cash both into and out of a business over a specific period of time. It provides a detailed view of how cash is generated and used in the company's operating, investing, and financing activities. This statement is vital for understanding a company's cash management practices and its ability to generate cash to meet its obligations and fund its growth. By analyzing the cash flow statement, you can gain insights into:
A well-structured cash flow statement can help businesses identify cash flow trends, assess their liquidity, and make informed decisions about their cash management strategies. To undertand the layout and design of this report as well as how to interpret it, check out our blog post The Anatomy of the Statement of Cash Flows. |
Statement of Cash Flows:
Key Concepts & Connections
Concepts Related to the
Statement of Cash Flows
The Statement of Cash Flows tracks the actual movement of cash through a business, categorized into three core areas: Operating, Investing, and Financing Activities. It bridges the gap between the Income Statement and the Balance Sheet by showing how a company's Profitability translates (or doesn't) into actual Cash Flow. It is the ultimate measure of a company's Liquidity.
The Statement of Cash Flows
in Action:
The Adventures of Coco and Cami
Coco's Income Statement shows a big profit from a large catering job, but her bank account is almost empty. She's confused—how can her business be "profitable" but have no cash to pay the bills?
Professor A shows her the Statement of Cash Flows. It clearly shows that while the sale was recorded as revenue, the cash hasn't been collected yet from her client. The report shows exactly where her cash went (to buy supplies) and where it hasn't come from yet, explaining the difference between profit and cash on hand.