cash flow statement



A summary of the actual or anticipated incomings and outgoings of cash in a firm over an accounting period (month, quarter, year).

It answers the questions:

  • Where the money came (will come) from?
  • Where it went (will go)?

Cash flow statements assess the amount, timing, and predictability of cash-inflows and cash-outflows, and are used as the basis for budgeting and business-planning.

The accounting data is presented usually in three main sections:

  1. Operating-activities (sales of goods or services),
  2. Investing-activities (sale or purchase of an asset, for example), and
  3. Financing-activities (borrowings, or sale of common stock, for example).

Together, these sections show the overall (net) change in the firm's cash-flow for the period the statement is prepared.

Lenders and potential investors closely examine the cash flow resulting from the operating activities.

This section represents after-tax net income plus depreciation and amortization and, therefore, the ability of the firm to service its debt and pay dividends.

With balance sheet and income statement (profit and loss account), cash flow statement constitutes the critical set of financial information required to manage a business.

Also called statement of cash flows.

See also: List of Key Accounting Terms and Definitions at

Use cash flow statement in a sentence

  • Being able to prepare a good cash flow statement will make it much easier for you to break down your yearly finances.

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  • Our business would require a cash flow statement, so we could see how we were doing with our investing and financing activities.

    10 people found this helpful
  • Being able to properly read your cash flow statement lets you know how your business is running at the moment.

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