A cash flow statement is a type of financial report that shows a company’s intake and outflow of cash over a certain time period. Investors, analysts, and creditors all rely heavily on the cash flow statement to evaluate the liquidity and financial stability of a company.
Operating activities, investment activities, and financing activities make up the statement’s three primary sections.
The everyday business operations that result in cash inflows and outflows are referred to as operating activities. These include earnings and outlays for things like sales, pay, and supplies.
Cash flows associated with the acquisition and disposal of long-term assets like real estate, plants, and machinery are referred to as investing activities.
Cash flows associated with financing a firm, such as borrowing money, paying off debt, and issuing and repurchasing stock, are referred to as financing operations.
Accounts receivable collection, the sale of long-term assets, and borrowing money are some of the sources of cash. Inventory purchases, accounts payable payments, and debt repayment are just a few applications for cash.
In contrast to the fund flow statement, which covers both cash and non-cash elements, the cash flow statement only focuses on the inflows and outflows of cash.
The fund flow statement is used to track changes in a company’s financial situation over time and to assess the flow of money between other financial statements.
In conclusion, the cash flow statement is a crucial financial report that shows how much money is coming into and going out of a company. Accounts receivable collection, selling long-term assets, and borrowing money are some of the ways that cash is obtained.
Cash is also used for things like buying products, paying bills, and paying off debt. Because it solely considers cash, the cash flow statement is different from the fund flow statement, which also covers non-monetary elements.