What is the cash flow statement?

Definition of Cash Flow Statement

The cash flow statement (officially known as the statement of cash flows) is one of the required financial statements issued by U.S. businesses (and by not-for-profit organizations).

The cash flow statement reports a company's major cash inflows and cash outflows during the same period as the company's income statement. The cash flow statement is important because the income statement reflects the accrual method of accounting. This means the income statement reports revenues when they are earned (not when money is received) and expenses and losses when they occur (not when money is paid out).

The cash flow statement concludes by showing that its amounts agree to the change in the company's cash and cash equivalents from the beginning to the end of the accounting period.

Example of Cash Flow Statement

The cash flow statement reports the following financial information:

  • Cash provided and used in the company's operating activities
  • Cash provided and used in the company's investing activities
  • Cash provided and used in the company's financing activities
  • Supplemental information reporting significant changes to the above activities that did not involve cash
  • Disclosing the amount of interest paid and income taxes paid
  • Showing that the amounts reported agree with the change in the company's amount of cash and cash equivalents during the accounting period.

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