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LeoGlossary: Cash Flow Statement

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A cash flow statement is a financial statement that shows how much cash a company has generated and used over a specific period of time. It is one of the three most important financial statements, along with the balance sheet and the income statement.

The cash flow statement is divided into three sections:

  • Cash flow from operating activities: This section shows how much cash the company has generated from its core business activities, such as sales and collections from customers.
  • Cash flow from investing activities: This section shows how much cash the company has generated from selling or buying investments, such as plant and equipment or marketable securities.
  • Cash flow from financing activities: This section shows how much cash the company has generated from borrowing or repaying money, as well as from issuing or repurchasing stock.

The net cash flow from all three sections is shown at the bottom of the cash flow statement. This number shows how much cash the company has gained or lost over the period of time covered by the statement.

Here are some examples of cash flows from each section of the cash flow statement:

Cash flow from operating activities:

  • Cash received from customers for sales
  • Cash paid to suppliers for inventory
  • Cash paid to employees for salaries and wages
  • Cash paid for rent and utilities

Cash flow from investing activities:

-Cash received from the sale of plant and equipment

  • Cash paid for the purchase of plant and equipment
  • Cash received from the sale of marketable securities
  • Cash paid for the purchase of marketable securities

Cash flow from financing activities:

  • Cash received from borrowingmoney
  • Cash paid to repay debt
  • Cash received from issuing stock
  • Cash paid to repurchase stock

The cash flow statement is a valuable tool for investors, creditors, and management. It can be used to:

  • Assess a company's financial Health and stability

  • Identify trends in the company's cash flow position

  • Make informed decisions about investing in or lending money to a company

  • Understand how the company is using its cash resources

General:

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