Cash Flow Statement

Cash Flow Statement

Cash Flow Statement Jonathan Poland

The cash flow statement is a financial statement that shows the inflows and outflows of cash for a company over a specific period of time. It provides information about a company’s cash receipts and cash payments, and shows the net change in the company’s cash and cash equivalents during the period.

The cash flow statement is typically prepared using the indirect method, which starts with the net income for the period and adjusts for non-cash items and changes in balance sheet accounts to arrive at the net cash flow from operating activities. The statement then shows the cash flows from investing and financing activities, which provide additional information about the sources and uses of the company’s cash.

The cash flow statement is an important financial statement, as it provides information about a company’s ability to generate cash flow from its operations and its investment and financing activities. It is useful for both internal decision-making and external reporting to investors, creditors, and other stakeholders.

Cash flows from operating activities represent the cash generated or used by a company’s core business operations. These cash flows include items such as cash receipts from sales, cash payments for expenses, and cash payments for taxes.

Cash flows from investing activities represent the cash generated or used by a company’s investments in long-term assets, such as property, plant, and equipment, or investments in other companies. These cash flows include items such as cash receipts from the sale of assets, cash payments for the purchase of assets, and cash payments for dividends or interest.

Cash flows from financing activities represent the cash generated or used by a company’s financing activities, such as the issuance or repurchase of debt or equity securities, or the payment of dividends. These cash flows include items such as cash receipts from the issuance of debt or equity, cash payments for the repurchase of debt or equity, and cash payments for dividends.

Together, these elements provide a comprehensive picture of a company’s cash inflows and outflows, and are essential for understanding the company’s ability to generate cash flow and meet its financial obligations.

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