Learn/Stocks/What is a Cash Flow Statement?

What is a Cash Flow Statement?

A cash flow statement provides information about a company's cash receipts and cash payments during an accounting period.

There are three very significant tables in a company's financial report, including the income statement, balance sheet, and cash flow. A cash flow statement provides information about a company's cash receipts and cash payments during an accounting period. Its importance is often overlooked.

We made an infographic to introduce the cash flow statement.

‌

As the graph above shows, the cash flow statement not only provides information about cash generated in operating activities but also gives us the details of the cash provided in a company's investing and financing activities. In other words, these are the three main areas at which cash is located.

Cash flow statements can answer questions you may have about a company’s financial standing, like whether the company's cash generated by operating activities is enough to cover its new investment, or if the company is relying on the new debt. Does the company pay its dividends to common stockholders using the cash generated from operations, from selling assets, or from issuing debt? How much is left at the end of this quarter?

These answers are pretty substantial as information about the sources and uses of cash helps creditors, investors, and other statement users evaluate the company's liquidity, solvency, and financial flexibility. These capabilities of a company can help you decide whether or not to invest.

All investments involve risks and are not suitable for every investor. The value of securities may fluctuate and as a result, clients may lose more than their original investment. No content should be construed as investment advice or recommendation, or an offer or solicitation, to deal in any investment product.