The Statement of Cash Flows is a financial statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents, and breaks the analysis down to operating, investing, and financing activities. Essentially, the cash flow statement is concerned with the flow of cash in and cash out of the business. As an analytical tool, the statement of cash flows is useful in determining the short-term viability of a company, particularly its ability to pay bills.


The cash flow statement includes only inflows and outflows of cash and cash equivalents; it excludes transactions that do not directly affect cash receipts and payments. The cash flow statement is a cash basis report on three types of financial activities: operating activities, investing activities, and financing activities.

The cash flow statement is intended to:

1.provide information on a firm's liquidity and solvency and its ability to change cash flows in future circumstances
2.provide additional information for evaluating changes in assets, liabilities and equity
3.improve the comparability of different firms' operating performance by eliminating the effects of different accounting methods
4.indicate the amount, timing and probability of future cash flows



Cash Flows
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