What is the purpose of the cash flow statement?

Purpose of the Cash Flow Statement

The purpose of the cash flow statement or statement of cash flows or SCF is to identify the major cash flows occurring during the same period of time as the company's income statement and between the related balance sheets.

The major cash flows are presented in one of these classifications:

The net change from these three classifications also explains the major reasons for the change in the company's cash and cash equivalents between two balance sheet dates.

In addition to the cash amounts being reported as operating, investing, and financing activities, the cash flow statement is required to disclose other information, including the amount of interest paid, the amount of income taxes paid, and any significant investing and financing activities which did not require the use of cash.

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