What is a Cash Flow Statement?

Statement of cash flows is a statement that shows how much cash is generated by a company over time and where it went. In other words, it is a statement of a company’s detailed cash payments and cash receipts.

In essence, the statement main objective is to present detailed information on a company’s sources and uses of cash.

 

Structure of Cash Flow Statement

The statement is divided into three main sections

  • Cash flows from operating activities.
  • Cash flows from investing activities.
  • Cash flows from financing activities.

 

Information required to prepare a Cash Flow Statement

Being a vital component of financial statement, it is the summaries of the inflows and outflows of cash in an entity.

It reveals the inward and outward movement of money that is generated from business operations, investments and also the financing activities.

  • The operational cash flow includes daily activities like sales and inventory purchased.
  • Investment cash flow covers income and expenses which came from long term projects
  • Financing cash flow reveals potential changes in capital base of the business via sales of share, dividend distributions, borrowing and debt repayments.

 

 

The purpose of the Statement of Cash Flows

Statement of cash flows was designed to provide cash payment and receipts and to provide detailed information about the investing, financing and operating activities of a business entity.

 

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