Introduction of The Cash Flow Statement
The Cash Flow Statement: Introduction of The Cash Flow Statement
Another important financial statement is the Cash Flow Statement, which is also called the Statement of Cash Flows. It shows how changes in income and amounts on the balance sheet affect cash and cash assets. It's mostly made up of three parts:
Operating Activities
This part shows how much cash the company makes or spends on its main business activities, like sales income and costs like rent, salaries, and utilities. It includes changes in things like inventory, accounts due, and accounts payable that are part of working capital.Investing Activities
This part shows the cash flows that happen when long-term assets or investments are bought and sold. PP&E buying and selling, investment buying and selling, and lending and receiving money from others are all things that fall under this category.Financing Activities
This part shows the cash flows that the company uses to run its business. These include buying and selling stock, paying dividends, and taking out or paying back loans.
People who have an interest in a business can use the Cash Flow Statement to see how it makes and spends cash over a certain time period. It gives you information about how liquid, efficient, and financially flexible the company is. The Cash Flow Statement, along with the Balance Sheet and Income Statement, is a key document that investors, creditors, and experts use to judge a business's financial health and decide whether to invest in it.
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