Cash Flow Statement
A financial statement showing the inflows and outflows of cash from operating, investing, and financing activities.
Also: statement of cash flows
Definition
A cash flow statement is a financial statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents, broken into three sections: operating activities (cash generated from core business), investing activities (capital expenditures, acquisitions, investments), and financing activities (debt, equity issuance, dividends). Unlike the income statement (which uses accrual accounting), the cash flow statement shows actual cash movement. Free cash flow (operating cash flow minus capex) is a key metric.
Example
“A company might show positive net income of $5M but negative operating cash flow of $2M if customers haven't paid their invoices yet ”” a warning sign for investors.”
Usage Examples
- 1
“The team applied cash flow statement best practices to improve their accounting outcomes significantly.”
- 2
“Understanding cash flow statement is essential for anyone building a career in Finance.”
When & How to Use
Use 'Cash Flow Statement' when working in Accounting contexts where a cash flow statement is a financial statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents, broken into three sections: operating activities (cash generated from core business), investing activities (capital expenditures, acquisitions, investments), and financing activities (debt, equity issuance, dividends).
- ▸Applying cash flow statement principles during a accounting project or initiative
- ▸Explaining cash flow statement to a junior team member or stakeholder unfamiliar with Finance
- ▸Evaluating options or proposals using cash flow statement as a decision-making criterion
Etymology & Origin
The term 'Cash Flow Statement' derives from professional usage and entered Finance professional usage as the field formalised in the 20th century.
History & Evolution
The concept of cash flow statement has evolved alongside Finance. Early practitioners relied on informal methods; structured approaches emerged with the professionalisation of accounting in the mid-20th century. Today, cash flow statement is a standard part of Finance practice globally.
Synonyms
- cash flow report
- statement of cash flows
- liquidity statement
Images
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Related Terms
- balance-sheet
- income-statement
- free-cash-flow
- accrual-accounting