Cash Flow Statement

A Cash Flow Statement is a financial document that provides a detailed analysis of how cash moves in and out of a business over a specific period. It's divided into three sections: operating activities (day-to-day business operations), investing activities (purchase and sale of long-term assets), and financing activities (borrowing, repaying debt, and equity transactions). Unlike the income statement which uses accrual accounting, the cash flow statement shows actual cash movements, making it crucial for assessing a company's liquidity and financial health. Positive cash flow indicates the company has sufficient liquidity to meet obligations, while negative cash flow may signal financial stress. This statement helps investors, creditors, and management understand how the company generates and uses cash, which is essential for survival regardless of profitability on paper.