Cash Flow Statement (CFS)

A cash flow statement is a legally required component of a company’s financial reports that records all cash coming in and out of the business. It identifies the sources of your revenues, how you’re spending, and how you’re operating.

 

The main point is to tell how well you’re managing your cash flow. The cash flow statement can indicate whether you are generating enough cash to pay your debts and your day to day operating expenses. It’s been a part of the mandatory information required in a company’s financial report since way back in 1987. It goes alongside the balance sheet and income statement to generate a full picture of your company’s financial situation.

The cash flow statement lets investors know your company is running from a bird’s eye view, where you’re spending your money and how that money is being spent. It’s important in helping investors tell whether you are running your company in a smart way or if you’re burning through money like it’s your job. Creditors use the cash flow statement as well to see how much money you’ve got in relation to what you owe when deciding whether to extend more credit to you or not.

 

The main things you’ll find in the cash flow statement are cash from operating activities, investing activities, and financing activities. Disclosure of non-cash activities is sometimes included if the statement is prepared under the generally accepted accounting principles, or GAAP.

 

The cash flow statement doesn’t include the amount of cash you’re expecting to receive, just the cash you have. It’s not the same as net income and that’s why you also need an income statement and balance sheet along with it.

 

EXAMPLE:

We are totally making it rain with our recent cash flow statement.

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