Accounting terms

Dictionary of all accounting terms





What is a Cash Flow Statement?

A cash flow statement is a report of how much cash is flowing into and out of your business for a specified time period. In order to remain in business, you must have a positive level of cash flow.

The cash flow statement is one of the three main financial statements, the others being the income statement (or profit & loss statement) and the balance sheet. Businesses regularly measure their cash flow by creating a cash flow statement.

The cash flow statement reports the sources of cash, as well as its usage, in three different categories:

Operating activities

A company's operating activities are the primary means to generate revenue. Cash flow for operating activities generally mean revenues and expenses. Revenue could come from sales, accounts receivable, refunds, and any settlements. Expenses could be payments to employees and suppliers, fines, fees, lawsuits, cash payments for interest, refunds to customers, etc.

Investing activities

These are less common sources of cash. Usually they are associated with buying or selling assets. Cash inflows could come from loan collection, or sales of securities (from other entities) or long-term assets. Cash outflows could come from buying fixed assets, debt or equity (from other entities) or loans.

Financing activities

These cash flows come from changes in equity and borrowing. Cash inflows here could come from a company selling its own equity or proceeds from derivatives. Cash outflows could come from paying out dividends, debt issuance costs or outstanding debt.

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