Cash flow statement

A cash flow statement is a financial document that outlines the total cash inflows and outflows experienced by a company over a specific period. This statement reflects how efficiently a business generates cash and spends it, providing valuable insights into its liquidity and financial health.

Cash flow statements are typically categorized into three primary segments:

• Operating Activities: This section tracks the cash generated or used by a business's core operations—such as revenue from sales, payments to suppliers, inventory purchasing, or operating expenses.
• Investing Activities: These activities involve buying and selling long-term assets such as equipment, investments, or property. It highlights the company's investment strategies and capital expenditures.
• Financing Activities: Here, cash flows from borrowing, debt repayment, dividend payouts, or issuing shares are captured, offering insights into the company's financial structure and funding methods.

Creating and analyzing a cash flow statement is critical for managers, investors, and creditors. It helps assess how effectively the company manages liquidity, handles debt, and invests in future growth. Regularly reviewing cash flow statements enables stakeholders to spot potential financial challenges early and take corrective action to maintain the overall financial strength of a business.