Cash flow statement

A Cash Flow Statement is a key financial document used to track the inflow and outflow of cash within an organization over a specific period. It is essential for businesses to assess their liquidity, solvency, and overall financial health. The purpose of the Cash Flow Statement is to provide transparency about how cash is being generated and spent, which is crucial for effective financial decision-making, planning, and budgeting.
The scope of a Cash Flow Statement typically includes three main sections: operating activities, investing activities, and financing activities. It shows the cash inflows from business operations, the cash spent on investments, and the cash raised or paid through financing activities like loans or equity. This document helps stakeholders, such as investors, creditors, and management, understand the company’s cash position and its ability to meet short-term obligations.
Key features of the Cash Flow Statement include its ability to distinguish between cash generated by operations versus cash raised from financing or investing activities. It also highlights cash expenditures, such as for capital investments, debt repayment, and dividends. As part of a company’s financial reporting, the Cash Flow Statement provides critical information on a business’s capacity to generate future cash flows, which is important for long-term sustainability and growth planning. It is an essential tool for assessing financial risks and opportunities.