A cash flow statement is a financial report that provides a summary of the cash inflows and outflows of a business over a specific period. It helps stakeholders understand how cash is generated and used in the business, offering insights into its liquidity and overall financial health.

Key Components of a Cash Flow Statement
Operating Activities: This section reflects cash flows from the primary operations of the business, including:
Cash received from customers
Cash paid to suppliers and employees
Cash generated from core business activities
Investing Activities: This section includes cash flows related to the acquisition and disposal of long-term assets, such as:
Purchase of property, plant, and equipment
Proceeds from the sale of assets
Investments in other companies
Financing Activities: This section covers cash flows related to financing the business, including:
Cash received from issuing shares or taking loans
Cash paid for dividends or repayment of debt
Purpose of a Cash Flow Statement
Liquidity Assessment: It helps assess the company’s ability to meet short-term obligations and manage cash needs.
Financial Health: Stakeholders use it to evaluate the company’s cash management and operational efficiency.
Investment Decisions: Investors analyze cash flows to determine the viability and sustainability of a business.
Example of a Cash Flow Statement
Cash Flow Statement
For the Year Ended 2024
Cash Flows from Operating Activities
Cash received from customers $120,000
Cash paid to suppliers ($70,000)
Net Cash from Operating Activities $50,000
Cash Flows from Investing Activities
Purchase of equipment ($30,000)
Proceeds from sale of assets $10,000
Net Cash from Investing Activities ($20,000)
Cash Flows from Financing Activities
Cash received from loans $15,000
Dividends paid ($5,000)
Net Cash from Financing Activities $10,000
Net Increase in Cash $40,000
Cash at Beginning of Period $20,000
Cash at End of Period $60,000
Overall, the cash flow statement is a crucial tool for understanding a company’s cash management and ensuring its financial sustainability.