Month End Glossary

Statement of Cash Flows

The Statement of Cash Flows is a financial report that illustrates the cash generated and used by a business over a specific period.

The Statement of Cash Flows is a financial report that details the inflows and outflows of cash within a company across a specific time frame, like a month or a fiscal year. This document is pivotal in demonstrating a company's liquidity and its ability to cover operational and investment needs with the cash on hand.

The statement is divided into three main activities: operating, investing, and financing cash flows. Operating cash flows represent the cash generated or used by the company's primary business operations, such as money received from customers. Investing cash flows show cash transactions related to acquiring or selling property, plant, or investments, like buying new machinery. Financing cash flows cover cash movements from borrowing, repaying debt, or issuing shares.

For example, if a company shows positive cash flow from operations but negative cash flow from investments, it might indicate the company is utilizing its operational cash to grow by investing in new assets. Businesses and investors thường analyze this statement to ascertain liquidity, identify cash flow patterns, and ensure the company can sustain its operations and honor financial commitments. Compared to other financial statements like the Balance Sheet or Income Statement, the Statement of Cash Flows is unique because it focuses exclusively on cash liquidity.

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