A cash flow statement is a financial statement that presents total data. Including cash inflows, a business gains from its continuing progress and external financing sources, as well as all cash outflows that pay for trading activities and finances during a delivered time. In other words, a cash flow statement is a financial statement that estimates the cash produced or used by a firm in a presented time. The cash flow statement furnishes data about the shift in the position of Cash Equivalents and Cash of a firm, over an accounting period. The pursuits according to this change are incorporated into investing, financing and operating.
Elements of the Cash Flow Statement
- Cash flow from operating activities: This section shows cash from daily business operations—like selling goods, paying employees, and buying materials. It reflects how well the business is doing in its core activities.
- Cash flow from investing activities: This part includes cash spent on or earned from investments—like buying equipment or selling assets. It shows how the business is growing or changing its setup.
- Cash flow from financing activities: This section tracks money from loans, investors, or repayments. It shows how the business is funded and how it handles its debts or returns money to shareholders.
The cash flow statement is different from the balance sheet and income statement, because it does not include the future transaction of cash listed on credit. Therefore, money is not equal to net income, whereas, on the income statement and balance sheet, it should be equal, including cash sales and sales made on credit.
A cash flow statement is more than just numbers—it’s a tool that helps people make smart decisions. Whether you’re running a small business or managing a large company, understanding your cash flow is key to staying financially strong and prepared for the future.