What Do You Understand By Cash Flow Statement?
Answers
cash flow statement is a financial statement that provides aggregate data regarding all cash inflows a company receives from its ongoing operations and external investment sources, as well as all cash outflows that pay for business activities and investments during a given period.
Understanding Cash Flow
BREAKING DOWN Cash Flow Statement
The cash flow statement is focused on cash accounting, whereas there are two forms of accounting, accrual and cash. Most public companies use accrual accounting, which means the income statement is not the same as the company's cash position.
For example, a company may sell product and extend its customers credit. It still recognizes that sale as revenue, but the company may not receive cash until a later date. The company is earning a profit on the income statement and will pay income taxes on it, but the business may bring in more or less cash than the sales or income figures. Even profitable companies can fail to adequately manage cash flow, which is why the cash flow statement is a critical tool for companies, analysts and investors. The cash flow statement is broken down into three different business activities: operations, investing and financing.