Accounting 101 » Statement of Cash Flows

[box]Statement of Cash Flows: also called Cash Flow Statement[/box]

Cash Flow Statement, presents the movement in cash and bank balances over a period. The movement in cash flows is classified into the following segments:

  • Operating Activities: Represents the cash flow from primary activities of a business.
  • Investing Activities: Represents cash flow from the purchase and sale of assets other than inventories (e.g. purchase of a factory plant)
  • Financing Activities: Represents cash flow generated or spent on raising and repaying share capital and debt together with the payments of interest and dividends.

How much money does your company have available right now? That’s a question your cash flow statement can answer.

As its name suggests, a cash flow statement charts the flow of money into and out of your business. It’s all about gauging liquidity — or cash on hand — so that you can make smart decisions about paying bills and buying additional assets or inventory.

When viewed with your company’s income statement (a report of sales and expenses during a specific time period) and balance sheet (a summary of the net worth of your company on a given day), your cash flow statement gives you a complete view of your company’s financial profile. (Publicly traded companies are required to disclose all three statements to the SEC each quarter.) 

Cash Flow Statement Example